Senate may keep some Affordable Care Act (ACA) taxes in its healthcare overhaul

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Republican Senators are discussing the option of keeping some of the ACA taxes they long criticized, in the hopes of delaying more drastic funding cuts, particularly to Medicaid. No final decisions have been made, but Republicans are trying to draft an ACA replacement bill before Congress recesses June 30. One tax that could remain is the 3.8% net investment income tax on capital gains, dividends, and interest. Another proposal being floated is to keep all ACA taxes but scale them back.

Taxpayer prevailed, in spite of using wrong form

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A taxpayer who intended to file for innocent spouse relief (available when a joint filer claims no liability for items on a tax return), instead filed Form 8379, “Injured Spouse Allocation” (used when a joint filer loses all or part of a refund due to the spouse’s debts). The IRS and the U.S. Tax Court rejected her claim. But the 9th Circuit Court of Appeals found that she met the requirement of the “informal claim doctrine” and, therefore, her innocent spouse relief claim was timely filed.

The IRS should help taxpayers understand the law

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A national taxpayer advocate recently testified before the Ways and Means Oversight Subcommittee on proposals to reform IRS operations in the House Republican tax reform blueprint. One suggestion: to focus not only on the percentage of calls that the IRS answers but also on “the range of services we want the tax administrator to provide.” The advocate said the IRS “today answers only ‘basic’ tax-law questions during the filing season and doesn’t answer tax-law questions during the other 8½ months of the year.”

Timely tax filing is crucial

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If a tax refund claim is denied, the taxpayer may file a refund lawsuit, within two years of the date the IRS mails the disallowance notice. In one case, a corporation received a refund that should have included (but didn’t) substantial interest due to the lateness of the refund. The corporation then filed a refund suit to recover the interest, but not within the two-year limit. The U.S. District Court rejected the claim, stating that, outside of the two-year limit, the court lacked jurisdiction.