Know your rights and other tips for filing your taxes this year

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• William Brangham:

  2018 is three days old, which means the Republican tax reforms are now the law of the land.

  President Trump signed the bill just before Christmas, giving the Internal Revenue Service just a few days to complete some historic adjustments.

  Lisa Desjardins looks at how the agency is scrambling to get up to speed.

• Lisa Desjardins:

  For that, I am joined by Nina Olson, the national taxpayer advocate at the IRS. It's her job to help taxpayers understand our rights and see that we are treated fairly when we file our taxes.

  Thank you for being here.

  All right, so we have a lot to talk about with this new tax law, but first I want to take a deep breath and talk about the IRS right now, even before the law. Can you give us a clear picture of how able the IRS is to handle the questions they face already?

• Nina Olson:

  Well, right now, the IRS is projecting, before the tax law, that it was only going to be able to answer six out of 10 calls during the filing season from taxpayers calling to speak to somebody.

  And for the whole year, they would only answer four out of 10. It gets about 100 million calls a year from taxpayers. And, right now, it's already said that it's not going to answer tax law — it hasn't been answering tax law questions after April 15 of each year.

• Lisa Desjardins:

  What happens to those who don't get through?

• Nina Olson:

  They don't get through. They…

• Lisa Desjardins:

  No answer.

• Nina Olson:

  They don't get an answer to their questions. Maybe they have to go and pay somebody to get an answer to the question, rather than getting it, information for free from the IRS.

  They can go to the IRS.gov web site. It has 140,000 Web pages, so do a search on that and see what comes up to your…

• Lisa Desjardins:

  That's a bit daunting. OK.

• Nina Olson:

  It's a little daunting.

• Lisa Desjardins:

  So, then now let's talk about this new tax law.

  And, of course, there are many questions already. Do we have anything from history that tell us the response from taxpayers, the needs that taxpayers may have to such a change in the tax law?

• Nina Olson:

  Well, you know, there are a couple of instances.

  In the last major reform in 1986, the IRS phone calls increased 14 percent in the year of that enactment, in the filing of that year. They hired 1,300 new employees. They expanded their call hours and things like that. They had to do about 131 new tax forms or revised forms and a whole bunch of new publications.

  With the 2008 economic stimulus payment, the phone calls where people got $300 or $600, the phone calls went from something like 67 million — 67 million to 151 million.

• Lisa Desjardins:

  Wow.

• Nina Olson:

  It was an increase of 125 percent.

• Lisa Desjardins:

  And that was a more simple change in the tax code.

• Nina Olson:

  That was just, you're getting some money back.

• Lisa Desjardins:

  So, then let's talk about some specifics.

  Property taxes.

• Nina Olson:

  Yes.

• Lisa Desjardins:

  You may have seen…

• Nina Olson:

  Yes.

• Lisa Desjardins:

  … that thousands of Americans last week lined up to pay their property taxes ahead of time, hoping to get that deduction one last time before the law changes.

  The IRS guidance on this came out, but I'm not sure it was ironclad. Do we know if those people will get the deduction or not?

• Nina Olson:

  Well, the IRS' position is that unless you have been — your taxes have been assessed, your 2018 taxes were assessed in 2017, you won't get a deduction.

  Some of the states have come out saying, well, this is a state's right issue, we get to decide whether they're assessed or not. Some of the localities have said, well, we're not changing our assessment procedures, and, by the way, we're not refunding. Others are saying, well, we don't quite know what we're doing.

  I really am worried that, going forward, there will be lots of people claiming those deductions. Maybe they will get tied up with IRS denying them. And then you are in court. And then we have courts saying, well, does state law or is it federal? I don't know the answer to that.

• Lisa Desjardins:

  I wonder if there is a similar situation with another complicated topic, the pass-throughs or small businesses that get this new deduction.

• Nina Olson:

  Yes. Yes.

• Lisa Desjardins:

  How much work does the IRS have to do now to set the exact guidelines on who gets that? And what do people need to know who are considering it?

• Nina Olson:

  Yes.

  Well, the IRS hasn't yet put out guidance about that. This is one things about this bill, is that we have a very short time frame in which to get guidance out. And my caution to people is, don't make business decisions like this just purely for tax reasons.

  And becoming like an S-corporation really has legal implications and all sorts of other implications in your life. And another issue that we see with this is, a lot of people who are now wage earners are thinking, maybe I should become an independent contractor. But that means that you're going to be responsible for paying your estimated taxes.

  And if you get behind, you may end up paying money in penalties and interest to the IRS for not making your payments timely that might offset that 20 percent deduction that you might get. So you really have to think these things through.

• Lisa Desjardins:

  Some advice, and still not exactly clear answers yet on that.

  How about on people's paychecks? You know, show me the money. Everyone is wondering, when are they going to see the changes affect people's paychecks?

• Nina Olson:

  So, the IRS estimates right now that they will get the withholding tables and formulas done no later than the third week in January.

  And then that means that the software companies and the employers and the payroll companies are going to have to get that built into their systems. So we're sort of expecting maybe mid-February people will start seeing that.

  And then we have to create a W-4 form, because there are no longer any personal exemptions. So you have to recreate that form, so people can fill it in.

• Lisa Desjardins:

  We have only covered a few of the aspects of this bill. How worried are you? What is the sense at the IRS? You sort of have a dual role here.

• Nina Olson:

  Yes.

• Lisa Desjardins:

  You're at the agency, but you're a taxpayer advocate.

• Nina Olson:

  Yes.

• Lisa Desjardins:

  How worried are you about the implementation of this law?

• Nina Olson:

  Well, you know, the IRS has estimated that, over the next two years, it needs about $495 million to really do the implementation of tax reform, reprogramming 131 systems that are going to be impacted by this law, and getting publications out, getting guidance out, getting forms.

  And the IRS is pretty good about getting stuff done, but the problem is, if they don't get additional funding, they're going to take money that is going to basic services to taxpayers and move it to implement this law, and that harms everybody. So, I think people are worried.

• Lisa Desjardins:

  All right, it's no big deal. It's just the tax code.

• Nina Olson:

  It's just the tax law.

• Lisa Desjardins:

  Nina Olson, the national taxpayer advocate, thank you for joining us.

• Nina Olson:

  Thank you for having me.