The government shutdown’s impact on your taxes

What’s affected so far, and what could be next

Updated 1/16/19: The IRS has created a shutdown contingency plan, asking over half its workforce to return to work, mostly without pay while the government is shutdown. Approximately 42.6% will still remain furloughed despite the 2019 tax filing season still scheduled to start on Jan. 28. Read more on Accounting Today.

The government has been partially shutdown for weeks and if it goes much longer, it could impact not only open cases with the IRS, but this year’s tax season.

The IRS released a contingency plan in preparation of the shutdown, but it only accounted for IRS operations during the first five days of lapsed appropriations.

Under that plan, the IRS will continue to process certain tax returns with payments and accept disaster relief-related transcript requests. However, several key operations would be discontinued during the 2019 tax-filing season if the shutdown persists.

Generally, halted IRS functions would include:

– tax refunds

– processing of transcripts (except related to disaster relief)

– audits

– processing amended returns or Form 1040X

Open audits and cases can be especially frustrating for those affected. The IRS phone lines, auditors, and almost all employees of the IRS are not allowed to work during the government shut down.  This means that no one can call the IRS to settle a notice, and there is no one there to open the mail and read or settle your case.  You (or your CPA) cannot speak to any auditors during this time.

CWA Tax Director Kristina Yarbrough states, “Based on experience from prior shutdowns, it can be expected that existing delays and slow IRS response times will only grow.”  She then adds, “On average, the IRS was already  around three to five months behind on processing most written correspondence concerning notices, which means we could now be looking at a timeframe of four to seven months to get a letter read and responded to.”

“With the average amended return currently around five to seven months, it can be expected to be more like six to nine months to process.  Any large refunds that were going to taxpayers – may likely be delayed as well,” says Kristina.

The CWA tax and planning teams are keeping close tabs on the government shutdown and its impact to our clients. Amid this delay, we are watching all open notices and will work on them as soon as we can.

If you have any specific questions, please contact your CWA planning team or contact us here.