The IRS has recently announced that it will begin accepting both paper and electronic tax returns for the 2018 tax year beginning January 28. However, much of the process remains uncertain due to the ongoing federal government shutdown and how it will affect this year’s filings. While the Trump administration has stated that the IRS will pay refunds during the closure — a shift from how any previous federal government shutdown has handled IRS practices— it’s not clear how quickly refunds will be able to be processed.
Current Effects on the IRS
Since December 22, it is estimated that nearly 800,000 federal government workers have been furloughed due to the stalemate between President Trump and Congress over allowing funding for a wall along the southern border. Although a contingency plan has been published for the IRS, it unfortunately lapsed on December 31, 2018, and only provided that 12.5% of the agency’s approximately 80,000 employees would be deemed essential. At the time, that meant that only about 10,000 employees would continue working during the shutdown.
These furloughs are important to this process because the standoff over the budget for the border wall has, in turn, prevented the passing of a number of the appropriations bills that give the federal government funding. While tax refunds aren’t paid with appropriated funds, IRS employees are. In past shutdowns, the IRS hasn’t paid tax refunds because it was unable to compensate for the appropriated funds that it needed to pay its employees who process tax refunds. Trump administration attorneys, however, have determined the agency will be able to issue refunds during this government shutdown.
In order to timely process refunds once filings are accepted, the IRS likely will need far more than 12.5% of its employees back on the job. Just last year in 2018, the IRS received nearly 18.3 million returns and was able to process 6.1 million refunds just within in the first week of tax season. Only one week later, it had received another 30.8 million returns and issued 13.5 million refunds. Although the IRS has indicated that it will recall “a significant portion of its workforce” back to work, these employees will have to work without pay while the shutdown continues. The IRS says it will release an updated contingency plan “in the coming days.”
The implementation of the latest federal tax overhaul could also further complicate matters for taxpayers. With the enactment of Tax Cuts and Jobs Act (TCJA), the 2018 tax year will be the first to be subjected to tax code changes, as well as new tax forms. It is important to note that a number of TCJA implementation activities, like the development of new publications and instructions, will still continue due to earlier funding by appropriations legislation.
Be aware that taxpayers and their accountants may be unable to contact IRS with their questions. As of January 9, the recorded message that was received when the main line for the IRS was called said, “Live telephone assistance is not available at this time. Normal operations will resume as soon as possible.”
During the federal government shutdown in 2013, taxpayers were also unable to receive live customer service from the IRS when called, and walk-in taxpayer assistance was closed. At that time, the IRS website was available, but some of its interactive features were not. Treasury Secretary Steve Mnuchin has stated that the IRS will call back enough employees to have the ability to answer 60% to 70% of phone calls seeking tax assistance during this shutdown.
Filing Deadlines Will Remain the Same
Regardless of how IRS operations proceed during the shutdown, taxpayers will still need to comply with the filing deadlines. Individual taxpayers in every state, aside from Maine and Massachusetts, must file their tax return by April 15, 2019; filers in those two states have until April 17, 2019. Any individuals who obtain a filing extension will have until October 15, 2019, to file their returns but should pay the taxes owed by the April deadline to avoid any potential penalties. If you have questions about tax filing, please contact your local CRI professional.