The Impact of the Government Shutdown on Your Tax Refund

The partial federal shutdown has been with us for more than 25 days now and the tax season is rapidly approaching. Accountants are continuously warning that it will not be fun for tax filers. IRS has said that it would open the filing season on Jan 28 and send refunds to filers, shutdown or not. The nations’ tax agency also highlighted that it would recall a significant portion of its workforce. This will be unfortunate to order workers back to work without pay. However, IRS has to strive to continue offering their services.

Even if the taxman is able to crank out taxpayer refunds, the partial government shutdown could make the filing process more stressful than usual. Right now, getting the refund is no longer the issue. The major issue is the lack of support you will get if you try to call. This will make it difficult to filers who are claiming their refunds. If the shutdown continues, here is what may be standing between you and your tax refund.

Rule Uncertainty

In the last few weeks, accountants have been waiting for the last word on regulations that would affect clients’ 2018 returns. For example, small businesses in the US are holding out for the 20 percent qualified business income deduction. This is a break for the so-called pass-through entities such as sole proprietorships and S-corporations.

Accountants across the country are awaiting final regulations from the Treasury on this break to assist clients with their 2018 returns. Nevertheless, the prevailing movement shutdown has slowed that process. Notably, the business income deduction applies to more people than we realize. It would be nice to have those final regulations before the IRS resumes its filing services. This will go a long way to help people against filing amended returns.

Less Help

The shutdown has been ongoing for more than three weeks and the IRS is yet to roll out its contingency plan for the tax-filing season. According to an earlier contingency plan from the agency, positions that have been furloughed include personnel who will respond to taxpayer queries. According to a 2017 report from the agency’s Taxpayer Advocate Service, they get more than 95 million calls on its toll-free lines each year

Over 40 percent of taxpayers interviewed by the Taxpayer Advocate Service said that calling the IRS did not fully resolve their problem. The advocate conducted the survey to 3,735 respondents in February 2017. The Taxpayer Advocate Service found out that there are noticeable areas with the least customer satisfaction. This includes return preparation assistance, information on notice, and information on a refund.

This is the first time that filers will be filing their tax returns under the Tax Cuts and Jobs Act. Consequently, this will compound customer dissatisfaction further.  The TCJA regulation is a sweeping overhaul of the tax code that resulted in higher standard deductions and new limitations on itemized deductions.

There is an overhaul on Form 1040. The form has been trimmed to the size of a postcard and accompanied by six schedules.

The IRS may be unable to respond to questions from taxpayers. This is according to the chairperson of the American Institute of CPA’s task force on qualified business income, Troy Lewis. He also notes that there has been more change for individuals in the last two decades. Nowadays, people are more willing to ask for answers.

Amended Old Returns

If the shutdown continues, it will take longer for taxpayers with amended returns to get a refund. Staffs in the IRS responsible for processing amended returns were among the positions to be furloughed. That was according to an earlier IRS contingency plan.

Taxpayers should submit the amended tax return or Form 1040x on paper. Most notably, amended returns are manual. Therefore, taxpayers awaiting refunds based on amended returns will have a longer delay. According to the IRS, it can take up to 16 weeks to process a refund from amended tax returns.

The partial shutdown has had a negative impact on the various processes of the government. It is evident that the effects have trickled down to tax processes. It will be inevitable for taxpayers to experience these effects. We can only hope that the US Congress will solve the standoff against the President.