08 Jan Government Shutdown: How Will It Impact Your Tax Return?
As most people know, the federal government is currently under a partial shutdown due to a stalemate between President Trump and Congress over a federal spending deal. But now that tax season is underway, you may be wondering how this shutdown will impact your tax return.
Assuming the government shutdown is short lived, and ends in the next few weeks, there shouldn’t be any significant impact on your tax return. The IRS doesn’t expect their tax season to get fully underway until later in January, and so there would be little delay to their normal operations in this case. If anything, there may only be a slight delay on getting any refunds you’re due. But, should the shutdown extend into February, there are a few things you need to know.
What the IRS Will Continue Doing
Even with the government under a partial shutdown, the IRS’s plan states that they will retain 12.5 percent of their workers—that’s about 10,000 employees—while the remainder are furloughed, or placed on an unpaid leave. These remaining employees will be used to perform certain limited functions, most of which are already partially automated and require limited workers. This might include tasks like professing electronic returns, mailing tax forms, processing returns and payments, and keeping the computer systems up and running.
This means that you should be able to submit your tax returns online or by mail, even if the shutdown extends into February. However, there would be some major delays on getting any refunds that you’re expecting. And, if you’re expecting tax refunds from previous tax years, you shouldn’t expect to receive those funds until after the shutdown has ended.
The IRS may also call some furloughed employees into work as tax season goes on; these employees would be working without pay until the government shutdown ends, at which point they would collect back pay. However, this would still be a highly limited workforce, and significant delays on processing returns and refunds should still be expected.
What the IRS Won’t Do
During the government shutdown, the IRS will not be completing any of the following functions:
- Return examinations
- Non-automated collections
- 1040X processing
- And more (for a complete list, read the IRS’s contingency plan)
The IRS will also likely have a hard time continuing to implement Trump’s 2017 tax legislation. As the IRS states in their contingency plan, implementing the new tax law “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.” Making these changes will likely be stalled due to a limited workforce at the IRS.
What You Should Do
Of course, all of the details mentioned above hinges on how long the government shutdown lasts; and, the longer the shutdown lasts, the more serious problems at the IRS will become. Ideally, Trump and Congress will come to an agreement within the next few weeks, and taxpayers will see little delay on their tax returns and refunds.
However, even if the shutdown extends deep into tax season, you still can—and should—submit your tax return. And, even though the IRS may struggle with implementing the reformed tax law, you still must file as if the tax law has been put fully into effect. With the limited workforce, we highly recommend that you file electronically, as these are largely automated and will be processed more quickly than paper returns. If you have further questions about how the shutdown might impact your return or refund, or for assistance with tax prep in Provo, contact The Accounting Guys today.