As the IRS budget continues to be cut, its services are collapsing. In its recent report to Congress, the National Taxpayer Advocate, an independent organization within the IRS, said this year the IRS is unlikely to answer even half of taxpayer calls. And if you do get through, expect hold times to average 30 minutes, or more.
And don't look to the IRS to provide much help. The agency says it'll limit answering tax questions to just the most basic ones. Finally, the IRS has eliminated the return preparation assistance it once provided to taxpayers who are mostly low-income, elderly or disabled.
This decline in service hurts a lot of taxpayers. According to the Taxpayer Advocate's report, "nearly 200 million Americans interact with the IRS each year, more than 3 times as many as any other federal agency. The IRS receives more than 100 million phone calls, 10 million letters and 5 million visits to its walk-in sites each year."
Unfortunately, for more people, preparing and filing their tax returns on their own is getting increasingly difficult, especially now that taxpayers face new filing burdens under the Affordable Care Act. That means having a professional prepare your taxes is a good idea. Here are a few good reasons to add to the list of why that's so.
Did you buy health insurance on an exchange?
If you bought health insurance on one of the exchanges last year and received a subsidy that reduced your health insurance premium, you'll have new forms to file. Nearly 6 million Americans could fall into this category and will have to complete a Form 1095-A. A tax pro can use this information to complete the new Form 8962 Premium Tax Credit that you'll need to file to claim any unused subsidies.
Are you tripped up by the Alternative Minimum Tax?
This pesky tax nabs over 5 million taxpayers. You'll know if you're one of them if you check line 45 of your tax return and see this additional tax owed there. A tax professional can advise you on a few strategies that could reduce the AMT on your 2014 tax return. He can also check to see if you can claim a credit this year for the tax paid in prior years.
Can you claim a home office deduction?
If you're self-employed, then most likely you've performed at least some of your work from an office in your home. If so, you can claim a deduction for expenses you incur in connection with the business use of your residence (whether you own or rent). A tax pro will know how to claim these expenses on Form 8829. He can also help you figure out if it's better to use the new Simplified Option for Home Office Deduction. This option allows people who meet the criteria for claiming a home office deduction to claim a flat deduction of $5 per square foot, on a maximum of 300 square feet, for a total deduction of up to $1,500.
Are you self-employed?
If you're self-employed, there's a lot of room for deducting your reasonable business-related expenses. You'll benefit from an experienced tax pro who knows the ins and outs of the Schedule C and who can advise you on the best type of retirement plan that maximizes your deductible contributions. Also, he'll let you know when you should file a Form 1099 to report any payments you made to others.
Did you have significant investment activity?
If you have a lot of investment transactions to report, completing the Schedule D, Capital Gains and Losses can be a pain. The new cost-basis reporting rules require you to categorize this information, making this even more complicated. Hiring a tax pro just to complete this schedule can be worth the money.
The major national tax prep firms with walk-in centers, such as H&R Block, Jackson Hewitt and Liberty Tax Service, should be well positioned to reap a slew of new customers this year.