How did the Government Shutdown Impact Tax Season?
posted Mar 11, 2019 by Kenneth A. Freshman, CPA, JD in the Global Tax Blog
The 35 day government shutdown in Washington has many wondering how it will impact tax filing. Since the IRS is a federal government agency, will refunds be delayed?
This shutdown was the longest in federal government history, and thus created a tough environment at the IRS, as they lost staff and funding as a result.
The IRS was only able to answer a handful of calls during the 35 day lapse in funding, and there were a few things the IRS was unable to do including….
- Issuing refunds (The IRS can delay your tax refund until it completes necessary audits. Most times this occurs when the IRS is conducting a mail audit on your Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) return from a prior year. Typically, you’ll receive IRS Letter CP88 indicating that your refund is frozen until the IRS completes the audit.)
- Releasing liens and levies
- Creating installment agreements
- Reviewing pending IRS actions
By the end of the shutdown, the IRS faced:
- More than 5 million pieces of unprocessed mail
- 80,000 unaddressed responses to the Earned Income Tax Credit (EITC) audits from last year’s filing season
- 87,000 amended returns that still needed to be processed.
So, what now?
It is highly likely that the recent shutdown will have an ongoing impact upon the current tax filing season as well thereafter. Over the last several years the IRS has been operating on tight budgets which even before the shutdown have impacted its capabilities even in the best of circumstances. Couple the shutdown with the myriad of tax reform changes that need to be dealt with and the result is a perfect storm for the IRS, taxpayers and their tax preparers.
Last year’s tax reform made sweeping changes to the tax law. While these changes resulted in simplification for some taxpayers it also necessitated a total revamping of many tax forms including Form 1040. In many instances the final versions of these forms have not been released by the tax software companies. The net result of all this is a further compression of the tax season for preparers and their clients which is likely to result in more tax returns needing to be extended. In the past many individuals filed their returns by this time. In more recent years, many brokerage 1099s are not received until nearly the end of February so such early filings have become rare.
Bottom line is that the postcard tax filings have yet to live up to its reputation in light of the shutdown and other complications.
Learn more about the impact of the TCJA on this year’s filing by visiting our Tax Reform Center.
Need help with your filing? Reach out to us.