The ongoing federal government shutdown has significantly reduced the normal operations of the Internal Revenue Service, and while you might be tempted to think that closing the IRS is good thing, consider what it could mean if you are owed a refund or are dealing with a tax problem.
The IRS was heavily impacted when 25% of the federal government was closed on December 22, 2018. According to the IRS’s Lapsed Appropriations Contingency Plan (of course they have one) only 12.5% of the Service’s approximately 80,000 employees are still working. These so-called “excepted” or “exempted” employees are allowed to continue working because: (i) their particular job function is not funded through the annual appropriation that Congress has so far failed to pass for 2019, (ii) their work is necessary for the protection of human life or government property, or (iii) they are needed to help steward the IRS through the shutdown in an orderly manner. These excepted/exempted functions encompass a host of activities, including updates needed to implement the sweeping tax reforms enacted as part of the 2018 Tax Cuts and Jobs Act. The Service is still processing returns, up to the point of issuing refunds, and accepting the payments due on those returns. The shutdown does not excuse us from our obligation to file and pay on time.
It’s the things that the IRS is not doing during the furlough that will effect you the most – like paying your tax refund. The Service is not processing refunds during the shutdown. The length of the delay is anyone’s guess. The variable, of course, is how long will the furlough continue. But until Congress resolves the shutdown and passes a new appropriations bill the furlough will delay your refund (and the plans you made for the money), even if the shutdown ends tomorrow. The IRS call centers are closed, so if you have any questions about your refund, or the length of the delay, there is no one there to take your call.
If you are working with the IRS to resolve a tax problem you may wonder how the furlough is effecting the IRS’s collection enforcement arm. As you might expect, with only 12.5% of its employees able to work, the impact is significant. The IRS still has some limited functionality with collections. For example, automated collection functions will continue, so you are still going to receive balance due notices or statutorily required notices warning you that the Service may file a Notice of Federal Tax Lien or that you may be subject to wage and bank levies. They are still filing liens, and working to preserve cases that have bankruptcy or statute of limitations issues. Criminal law enforcement operations will also continue, so if your case was referred to the Service’s dreaded Criminal Investigation Division there is a good chance they are still at work on your case in spite of the furlough.
All audit functions and the examination of paper tax returns that do not include a payment, on the other hand, are suspended due to the furlough. That might sound like a pleasant idea, but anyone who suffers through an IRS audit wants nothing more than for it to end; and sooner rather than later. Taxpayers in the process of negotiating a settlement with the IRS may be frustrated to learn that the shutdown has stalled the processing of their offer indefinitely, which could cause unexpected problems with a loan if a lender is involved in providing the funds needed to pay the settlement.
If you are making payments under an Installment Payment Agreement, please continue to do so. The government shutdown does not relieve you of your obligation to make your payments on time, and you could jeopardize your agreement if you stopped sending your monthly check under the mistaken notion that your agreement is suspended too. It’s not. Remember, the IRS is still taking your money during the furlough, they just won’t give it back.