How the Government Shutdown Could Impact Your Tax Return

The federal government has remained under a partial shutdown since December, and there’s currently no end in sight. But tax season has now officially begun, and with the IRS performing limited functions during the shutdown, you might be wondering how your tax return and refund will be handled.

Should the shutdown end within the next few weeks, there should be very few delays on your taxes; the IRS doesn’t usually begin processing returns until later in January anyways. However, if the shutdown continues into February, there are a few things you should know about how your taxes will be handled.

What Will the IRS Keep Doing?

Since they government is only under a partial shutdown, the IRS still has 12.5 percent of its employees—or about 10,000 workers—still showing up on a daily basis. The rest have been furloughed, meaning they are no longer expected to come to work, and are not being paid. The 10,000 retained employees are just enough to allow the IRS to perform what it deems to be “essential” functions, as well as ensuring the continuance of any functions that are primarily automated, and require little human involvement. This might include:

  • Processing electronic returns
  • Mailing out tax forms
  • Processing returns with payments
  • Maintaining computer systems
  • And more

With these limited functions still happening, you should be able to continue submitting your tax return either online or by mail, and expect it to be processed—eventually. However, if you’re expecting a refund on your tax return, it will be quite a while before you’ll receive it. This is especially true if you’re expecting any refunds from previous tax years; you likely won’t be seeing that money until after the shutdown has ended.

As the shutdown continues, the IRS may recall some of its furloughed employees to limit delays—but those workers would be working without pay until the shutdown is over, and they can receive back pay. However, even with furloughed employees returning to work, there will still be significant delays on tax returns.

What Won’t the IRS Do?

With its limited workforce, there are many functions that the IRS will be unable to do, including the following:

  • Audits
  • Return examinations
  • Non-automated collections
  • 1040X processing
  • And more (for a complete list, read the IRS’s contingency plan)

Additionally, the IRS may have a hard time implementing Trump’s new tax legislation, much of which is supposed to go into effect for the 2018 tax year. This requires significant revisions to worksheets, tax forms, publications, and IRS policies and procedures. Considering the complexity of putting the new tax law into effect, it likely won’t happen so long as the IRS is working with a limited workforce.

What Should You Do?

Again, if the shutdown ends soon, most of this will have very little impact on your return or refund. However, the longer the shutdown continues, the more serious the delays and problems at the IRS will become.

For your part, you can and should still file your tax return, and your filing must adhere to all of the changes implemented by the Tax Cuts and Jobs Act of 2017. Additionally, we strongly recommend that you file electronically rather than by mail; e-filed tax returns are largely automated, and so will be processed much more quickly, even under the partial shutdown. If you have any other questions regarding how your taxes are impacted by the government shutdown, or you need assistance preparing your tax return, contact our tax firm in Provo today.