Shutdown Impact on Tax Season

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As the government shutdown enters its fourth week, leaders in Washington appear to be no closer to a settlement than when it started. The shutdown has furloughed 70,000 IRS and Treasury employees (almost 90% of the staff) just when the agency is usually gearing up for tax season. The IRS has much to prepare entering the first filing season under the Tax Cuts and Jobs Act (TCJA), such as updating forms and computer systems and training staff to answer questions.

 

The House of Representatives approved a standalone bill to fund IRS and Treasury by a 240-188 margin on Wednesday, but the provision is unlikely to reach the Senate floor in the current political environment. How will the shutdown impact tax filings?  Will individuals and businesses be able to submit returns, pay balances, and receive refunds?

 

Although the IRS is affected by the lapse in government appropriations, it announced this week that it will open e-filing and begin accepting 2018 returns on January 28, consistent with the start date in recent years. Moreover, despite prior Office of Management and Budget protocol of not permitting the issuance of refunds during a government shutdown, the IRS said it will do so.

 

The agency said it will recall a significant portion of its furloughed workforce as the season gets under way.  The head of the IRS's employees' union noted, however, that personnel will be working without pay. Last week's announcement added that "additional details for the IRS filing season will be included in an updated FY2019 Lapsed Appropriations Contingency Plan to be released publicly in the coming days," but the union is concerned over the delay.

 

Other IRS actions, such as guidance on the newly implemented TCJA, may encounter delays. For example, a planned January 10 public hearing for stakeholders to provide their views on the first set of proposed Opportunity Zones regulations, released in October (LMC TCJA Alert #25), was cancelled due to the shutdown. The postponement may delay the release of the eagerly anticipated final regulations.

 

LM Cohen alerts will keep you informed about the status of the IRS tax filing season. All our prior Tax Cuts and Jobs Act Alerts are available on the Updates page of our website.

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