The IRS has announced it will begin processing paper and electronic tax returns for the 2018 tax year on January 28, but much remains to be seen about how the ongoing shutdown of the federal government will affect this year’s filings. Although the Trump administration has stated the IRS will pay refunds during the closure — a shift from IRS practice in previous government shutdowns — it’s not clear how quickly such refunds can be processed. Regardless, it’s important to note that tax filing deadlines will remain the same.
How is the Shutdown Impacting the IRS?
An estimated 800,000 federal government workers have been furloughed since December 22, 2018. The most recent contingency plan published for the IRS lapsed on December 31, 2018, but it provided that only 12.5% of the tax agency’s approximately 80,000 employees would be deemed essential and therefore continue working during a shutdown.
While tax refunds are not paid with appropriated funds granted by the government, in the past the IRS hasn’t paid tax refunds during shutdowns because it didn’t have the appropriated funds necessary to pay the employees who process refunds. The Trump administration has stated, however, the agency can issue refunds during a shutdown.
The IRS likely will need far more than 12.5% of its employees on the job 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. By just one week later, it had received 30.8 million returns and issued 13.5 million refunds. Even though the IRS has indicated it intends to recall “a significant portion of its workforce” to work, 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.”
How Will the Government Shutdown Affect Tax Reform?
The implementation of tax reform 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 because they’re funded by earlier appropriations legislation.
Be aware that taxpayers and their accountants may not be able to contact the IRS with questions. During the 2013 government shutdown, taxpayers couldn’t 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 weren’t. Treasury Secretary Steve Mnuchin has stated the IRS will call back enough employees to work to answer 60% to 70% of phone calls seeking tax assistance during this shutdown, which could lead to widespread taxpayer frustration.
Will Tax Filing Deadlines Change Because of the Shutdown?
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.
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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.