Another government shutdown could certainly slow down tax return processing. This could indeed delay refunds. Here are a few things to think about:
1) Anytime the government “shuts down,” that event does not affect all employees the same. Generally, only non-essential employees are told to stay home. Similarly, only non-essential services are cut. However, these non-essentials include many of the operations at IRS. During 2018’s first shutdown, IRS contingency plan furloughed over 50 percent of the IRS staff, which was approximately 35,000 employees.
2) There has never been a governmental furlough during the early tax filing season. The IRS is unprepared for such an event—and reasonably so. During the filing season, processing tax returns, and issuing timely refunds is a significant undertaking when staffing is at 100 percent. IRS losing over half of the work staff, due to political disagreements in Congress, is a foreseeable event. However, that does not change the workload required when the staff is at 100 percent. Obviously, the work of issuing your refund will move slower.
3) During the period of a government shutdown, including several days before, and especially during an extended period afterward, there is a significant decline in “internal revenue,” or tax collection. What is more, part of IRS’s pre-funded budget includes a “working capital” for operations. Government shut-downs send a big ripple of declined cash flow to those funds. Unfortunately, refunds are paid out of this working capital, especially for early tax filers.
Borrowed from a Forbes article, this is a partial list of IRS functions that would become temporarily halted:
• No tax refunds issued
• No processing of non-disaster relief transcripts
• No processing of forms 1040X, amended returns
• No non-automated collections
• No audit nor examinations (some exceptions apply)
• No whistleblower office activity
However, anyone filing a return with a payment can continue to do so during the shut-down. Also, the IRS call centers will remain open. Expect those phone lines to be busy. And good luck!
Written by J Anton Collins, JD, LLM (former CPA and former IRS). Attorney Collins is a principal and frequent blogger at Tax Law Offices. If you are in need of an IRS tax attorney, contact Tax Law Offices today. We look forward to speaking with you.