Tax Season Will Start On Jan. 28 despite Government Shutdown

On Monday (January 7), the IRS announced that income tax filing season would begin on January 28. In addition, the service would pay tax refunds to taxpayers in spite of the government shutdown. To facilitate the smooth running of these activities, the IRS will recall a significant portion of their workforce. This is an unfortunate move considering that no employee has received his or her pay. Even so, IRS was unable to provide the specific details on the number of workers that would be back and for which functions. That may be because the agency is yet to release its updated contingency plan for the filling season. A Trump administration official previously said that the IRS would pay income tax refunds regardless of the government shut down.

The Unavailable Taxman

Russell T. Vought, acting director of the White House Office of Management and Budget said that tax refunds would go out. He noted that there has been a growing concern that the tax refund may delay. Over 800,000 federal workers are furloughed or working without pay as southern border wall standoff continues.

Currently, only about 12 percent of IRS staff will continue working through a shutdown outside of filing season. That means that certain functions like answering taxpayers’ questions would be curtailed. Notably, the employees that deal with processing returns and customer service have been furloughed. There is disquiet about whether those called back to work will be compensated while they are working. The IRS has not answered such concerns either.

Nicole Kaeding, director of federal projects at the Tax Foundation, notes that this is a stressful time for accountants and their clients. She also said that the October 2013 shutdown caused a lot of angst for practitioners but this one is worse.

Edward Karl, vice president of taxation at the American Institute of CPAs confirms that the IRS is unreachable even if you a taxpayer have issues. “There were many folks concerned about that,” said Karl.

However, a House Ways and Means Committee staff has assured the public that they were struggling to get clarity from administration officials. However, may deem this as a PR stunt because the many of them are out on furlough. “We keep trying to call people at IRS and Treasury,” said Daniel Rubin, a spokesperson for the Ways and Means Committee. “There is no one there,” he added.

Early birds

The IRS has not yet kicked off the filing season. Nonetheless, millions of taxpayers across the country tend to submit their returns as soon as they can. Many taxpayers may need the tax refunds either to eliminate their remaining holiday debt or to boost their savings.

Last year, the IRS started the filing season on January 29. By February 2, the agency received 18.3 million returns and processed 6.1 million refunds. The average refund check at that time was around $2,035. The service received 154.4 million returns by November 23 of last year, the most recent data available. At this time, the issued an average refund was about $2,899.

Many accountants are agitated and say that taxpayers should not have to wait to get back their money. It is not the fault of taxpayers that the government is dysfunctional and shut down.  Accountants are of the view that there should be legislation that indicates that a government shutdown should not affect the IRS. Even though government shutdowns are rare, the legislation would ensure continuous funding of the service. Consequently, a lack of funds would not make the national tax collector shut down.

A busy time

It is unfortunate that the shutdown is taking place at a busy time for the IRS, accountants, and filers. Particularly, this filing season marks the first under the Tax Cuts and Jobs Act. The TCJA is an overhaul of the tax code that went into effect at the beginning of 2018.

Last year, this new tax code generally doubled the standard deduction to $12,000 for singles and $24,000 for married couples filing jointly. The tax code also restricted a number of itemized deductions. Moreover, it also placed a $10,000 limit on the amount of state and local taxes filers can deduct.

Noticeably, taxpayers will also be dealing with new tax forms. The Form 1040 has been shrunken to the size of a postcard. This implies that taxpayers will still need to work through pages of schedules to calculate other tax breaks.