The IRS starts processing tax returns towards the end of January and issuing refunds shortly after. This year may be quite different in that we are currently dealing with the partial government shutdown. The government employees, which also include the IRS staff, have been furloughed for a few weeks already and only the essential services are being provided. Prolonged government shutdown can only exacerbate current situation.
How will this affect tax returns?
If the shutdown continues, the IRS will continue to process returns, but it will not issue refunds. Based on its contingency plan, the IRS plans to keep roughly 12.5% (or 9,946) of its employees working and ensuring that the automated functions are not interrupted. Most of these employees fall under the category “Necessary for the Safety of Human Life or Protection of Government Property.” Some of their activities include criminal investigation, Information Technology, and Wage and Investment.
Many other services taxpayers rely on, which include branch offices (check before visiting), may not be available. Here is a short list of non-expected activities if the shutdown continues: audits, examination of returns, processing of non-electronic returns that do not have remittances, processing of amended returns, non-automated collections, issuing refunds, responding to taxpayers’ questions, or legal counsel.
One problem with the current contingency plan is that it explains how the agency will operate through December 31. We are already in January and the longer the shutdown continues, the more challenging it will be to draft and execute a new plan.
If the shutdown ends within the next few weeks, there may only be a small delay in processing the refunds. The taxpayers who tend to file taxes early will notice a slowdown in getting refunds. The second large wave of filers, those who do it in April, should not be impacted provided that the government is operating.