The IRS has announced it will begin accepting paper and electronic tax returns for the 2018 tax year on January 28, 2019, but much remains to be seen about how the ongoing federal government shutdown will affect this year’s filings. Although the Trump administration has stated that the IRS will pay refunds during the closure—a shift from IRS practice in previous government shutdowns—it is not clear how quickly such refunds can be processed.
Effects of the Shutdown on the IRS So Far
An estimated 800,000 federal government workers have been furloughed since December 22, 2018, due to the impasse between President Trump and Congress over funding for a southern border wall. The most recent contingency plan published for the IRS lapsed December 31, 2018, but it afforded that only 12.5% of the tax agency’s approximately 80,000 employees would be deemed essential and, therefore, continue working during a shutdown.
The furloughs are necessary because the standoff over the border wall has prevented the enactment of several of the appropriations bills that fund the federal government. Tax refunds are not paid with appropriated funds, but IRS employees are. In the past, the IRS has not paid tax refunds during shutdowns because it did not have the appropriated funds needed to pay the employees who process refunds. Trump administration attorneys, however, have determined that the agency can issue refunds during the shutdown.
The IRS likely will need far more than 12.5% of its employees to process refunds when it starts accepting filings. In 2018, the IRS received 18.3 million returns and processed 6.1 million refunds in the first week of tax season. A mere one week later, it had received 30.8 million returns and issued 13.5 million refunds. Even though the IRS has indicated that it intends to recall “a significant portion of its workforce”, it has provided few details, and those employees would have to work without pay. The IRS says it will release an updated contingency plan “in the coming days.”
TCJA Complicates the Picture
The implementation of the federal tax overhaul could further complicate matters for taxpayers. The 2018 tax year is the first to be subject to the Tax Cuts and Jobs Act (TCJA), which brought sweeping changes to the tax code, as well as new tax forms. Various TCJA implementation activities, such as the development of new publications and instructions, will continue, as they are funded by earlier appropriations legislation.
However, be aware that taxpayers and their accountants may not be able to contact the IRS with questions. When the IRS’s main number was called January 9, this recorded message was received: “Live telephone assistance is not available at this time. Normal operations will resume as soon as possible.”
During the 2013 government shutdown, taxpayers also could not receive live telephone customer service from the IRS, and walk-in taxpayer assistance centers were shuttered. 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 enough employees back to work to answer 60% to 70% of phone calls seeking tax assistance during this shutdown, and as a result, could lead to widespread taxpayer frustration.
Tax Filing Deadlines Are Still in Effect
Regardless of how IRS operations proceed, taxpayers still need to comply with the filing deadlines. Individual taxpayers in every state but Maine and Massachusetts must file by April 15, 2019; filers in those two states have until April 17, 2019. Individuals who obtain a filing extension have until October 15, 2019 to file their returns, but should pay the taxes owed by the April deadline to avoid penalties.
If you have questions about how the federal government shutdown might impact your tax filings, or would like more information about tax strategy and planning, contact one of our PYA executives below at (800) 270-9629.