The filing season is here

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Jan 24, 2022 View in browser   By Bernie Becker With help from Aaron Lorenzo LET'S GET THIS ROLLING: The good news is that, starting today, you can file your taxes — and get a refund, if one is owed. The bad news is that filing those taxes might be more difficult than it was in the past. Some of the problems have already been pretty well documented. For instance, getting through to the IRS on the telephone — never all that easy to begin with — will be especially difficult. The paper backlog at the IRS also stands at millions and millions of pieces, and the agency is pleading with taxpayers to file electronically. (Those who do, and who don't have particularly complicated returns and file without mistakes, can expect a refund within about three weeks.) IRS Commissioner Chuck Rettig will speak later today about the start of the filing season. But it might not be a great omen that unexpected challenges are starting to spill out even before the agency starts officially accepting returns. Case in point: The IRS is mailing taxpayers notices detailing how much they received in monthly child tax credit payments last year — and in many cases, that amount is wrong, as Pro Tax's Aaron Lorenzo reported late on Friday. It's not clear just how many people have been or will be affected by those incorrect letters from the IRS, but it could be in the millions — or at least hundreds of thousands. This is no small deal, either: The IRS has been stressing that taxpayers need to use those notices to figure out how much more they might be able to get out of last year's expansion of the Child Tax Credit, and those who got wrong information could see their refunds delayed or face other problems with their returns. MORE ON THIS IN A BIT, but first — welcome to the "get those W-2's ready" version of Weekly Tax. No word yet on which hops they used: Today marks 87 years since the Gottfried Krueger Brewery became the first company to sell canned beer. (Long story short: The public loved it, and dozens of breweries quickly followed suit.) Hooray, scoops! Please tell us what's going on out there. Email: bbecker@politico.com, alorenzo@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @aaronelorenzo, @tobyeckert, @Brian_Faler, @POLITICOPro and @Morning_Tax.   JOIN FRIDAY TO HEAR FROM GOVERNORS ACROSS AMERICA : As we head into the third year of the pandemic, state governors are taking varying approaches to public health measures including vaccine and mask mandates. "The Fifty: America's Governors" is a series of live conversations featuring various governors on the unique challenges they face as they take the lead and command the national spotlight in historic ways. Learn what is working and what is not from the governors on the front lines, REGISTER HERE.     THE POLITICAL SIDE: This might also be an omen for the struggles that might be coming during the filing season — the blame game is in full effect, and in fact already has been for weeks. A range of Democrats and their allies have urged the IRS to prioritize getting lower-income taxpayers their refunds as the filing season kicks off, even while noting that they sympathize with an agency they believe has been hamstrung by not getting enough funding. The National Treasury Employees Union, which represents thousands of IRS employees, followed that up on Friday with a statement imploring Congress to increase the agency's funding. "IRS employees are ready to tackle the problem, but the real culprits here are a decade of budget cuts, a smaller workforce, increased workload and a global pandemic," said Tony Reardon, NTEU's national president. It's true enough that Republicans have led the charge in limiting the IRS's budget over the last decade or more, as Wally Adeyemo, the deputy Treasury secretary, noted in an interview with Morning Money last week. For their part, Republicans have charged for years that the tax collector doesn't do a particularly efficient job with the resources it's given, and knocked President Joe Biden and congressional Democrats for favoring IRS enforcement funding over more money for taxpayer services. Semi-related note: House Ways and Means Chair Richard Neal (D-MA) and another senior tax-writer, Rep. Bill Pascrell (D-NJ), released a measure on Friday that would roll back tax refund delays for recipients of the Earned Income Tax Credit and other refundable incentives. Right now, the IRS can't deliver refunds to those taxpayers until Feb. 15 — the result of an anti-fraud measure placed into that big tax extender package back in 2015 that's meant to give the agency more time to cross-check tax returns with W-2 forms. But the result, according to Neal and Pascrell, is that a "well intentioned" policy is unfair to lots of lower-income people. "Americans who file their taxes early should not be penalized for their scrupulousness," they said. One more semi-related note: "IRS plans to unleash more attorneys to fight easement, insurance schemes," via Pro Tax's Toby Eckert. WHAT'S UP WITH THE BBB? As it happens, Biden's Build Back Better agenda remains in limbo. Biden himself has talked about potentially breaking off big parts of the Democrats' climate and safety net package. But there are plenty of procedural questions for Democrats to consider as they're seeking to salvage as much as they can of the Biden social spending agenda, as Roll Call's Paul Krawzak reported. And yet: Democrats are still talking as if they know it would be a major misstep if they can't get something across the finish line this year. Voters "want action on prescription drugs. They want action on home health care. They want action on climate," Senate Budget Chair Bernie Sanders (I-VT) said on NBC's "Meet the Press," adding that he still believes Democrats can "pass strong legislation which will help all Democratic candidates." And as for those monthly child tax credit payments? Key Democrats are still pushing hard to get that extended in any big package this year, though they're talking more and more openly about a bipartisan agreement being the best way to enshrine that policy into the law long-term. AROUND THE WORLD THIS IS WHAT WE'LL DO: The Hungarian opposition is vowing to cut taxes for lower-income people if they gain power in April, Reuters reports. Prime Minister Viktor Orban has been in power for more than a decade, and critics say his tax policy has been too generous to the middle class and the rich. An alliance of six opposition parties is opposing Orban's nationalist party in the upcoming elections, and their leader, Peter Marki-Zay, says he will focus on making Hungary's tax system more progressive. But Marki-Zay added that he didn't have any interest in raising the top income tax rate in Hungary, and instead was more intrigued by ideas like targeted cuts in the value-added tax for basic food items. The opposition leader believes that the strength of Hungary's economy would serve as a buffer against revenue lost because of any tax cuts aimed at the lower end, particularly as Marki-Zay and his allies want to shore up the country's fiscal situation and push Hungary toward adopting the euro.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Around the Nation OVER TO YOU: The Indiana House has passed a wide-ranging tax cut — but it's far from clear the state Senate will go along as well, The Associated Press reports. Both chambers and the governor's office in Indiana are all controlled by Republicans. But the state House has long signaled that it wants to be more aggressive with using record reserves, spurred in part by federal coronavirus relief aid, for tax cuts. The House plan would gradually cut the state's income tax rate from 3.23 percent to 3 percent, at a cost of around a half-billion dollars a year when fully implemented, and cut as much as $850 million a year in business taxes. For months, Gov. Eric Holcomb and state Senate leaders have been skeptical of the House's tax-cutting aims, preferring instead to consider tax measures in next year's legislative session — when the state has to write a new two-year budget. Meanwhile, Democrats in the state have been pushing instead for a cut in the state's sales tax, from 7 percent to 6.5 percent. Quick Links  WSJ: Treasury Secretary Janet Yellen "Views Biden Policies as Modernized Supply-Side Economics." Also WSJ: "States Are Swimming in Cash Thanks to Booming Tax Revenue and Federal Aid." WCVB: "Massachusetts marijuana excise tax revenue exceeds alcohol for first time." Did You Know Johnny Depp made his film debut in 1984's "A Nightmare on Elm Street," playing one of Freddy Krueger's victims.   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Aaron Lorenzo @aaronelorenzo   Follow us

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