Posted based on information available as of January 4, 2019
The federal government remains partially shut down as President Donald Trump refuses to sign the spending deal that still does not include $5 billion for the wall at the US-Mexico border. As taxpayers are beginning to think about filing their taxes, they may wonder how the shutdown may affect tax return filings.
Hopefully, if the federal government shutdown is over by mid-January, taxpayers should not be impacted or concerned about getting their tax refunds. The Internal Revenue Service (IRS), which handles federal taxes usually begins tax season late January. The good news is that once the IRS begins accepting tax returns, taxpayers will still be able to mail the tax returns or submit the returns online even if the government remains shutdown.
However, if the shutdown drags on longer, there could be delays and other serious problems at the IRS, such as the IRS’s contingency plan which only explained how the agency would handle the first five business days through December 31 of a shutdown. Unfortunately, if the shutdown lasts longer, the agency will have to rethink its plan resulting in possible agency employees being mandated to show up to work without pay.
As part of the government shutdown, the IRS planned to keep 12.5 percent of its workforce, which represents fewer than 10,000 federal employees. As majority of IRS workers are furloughed, the employees will no longer be paid or expected to show up to work for the time being. However, this could change as tax filing season begins and some workers could get called back and be expected to work without pay (at least until they get back pay once the government reopens).
The remaining workers and those called back without pay will let the IRS continue some of its operations on a short-term basis, particularly for functions that are automatic and require no workers including those functions that are deemed “necessary for the safety of human life or protection of government property.” This includes processing electronic returns, processing returns with payments, mailing tax forms, appeals, criminal law enforcement and investigations, and technical work to make sure computer systems remain operational. This means taxpayers will be able to mail in tax returns or submit their returns online even if the shutdown stretches into February.
Meanwhile, the IRS will also stop IRS examination audits, return examinations, non-automated collections, and 1040X processing and as well as other operations. (For a full list, read the IRS’s contingency plan.) If shutdown lasts, the IRS may opt to restart some of these functions. IRS may also have problems continuing implementation of the 2017 tax reform legislation. As the IRS’s contingency plan noted, the law’s implementation “requires creating or revising hundreds of tax products including worksheets and tax forms, form instructions and publications as well as changes to current IRS policies and procedures.” That work is likely to be delayed by a shutdown.
For more information please contact a member of the Herbein tax team, or email us at email@example.com.