The government has shut down, but tax season doesn’t stop

January 9, 2019

By Cheri Freeh at AICPA Insights on January 7, 2019

On the evening of January 7, the IRS confirmed in a news release that filing season will start on time – January 28 - and that it will be issuing refunds.

The IRS also noted it will be recalling a significant portion of its workforce, currently furloughed as part of the government shutdown. The filing deadline remains unchanged.

The IRS plans to release an updated FY2019 Lapsed Appropriations Contingency Plan publicly in the coming days.

The 2019 tax filing season is right around the corner, and CPAs everywhere are watching and waiting to see how it will unfold. Pending tax reform guidance, state tax law changes and cybersecurity concerns complicate the picture enough, and now we’re faced with yet another government shutdown.

It may feel like a perfect storm is brewing, and to say there’s uncertainty in the CPA community is an understatement. You probably have a lot of questions about what the shutdown means for you and your clients.

We’re here to share a little insight on that.

The government shutdown and you

In December, the United States government shut down for the third time in one year. Since the shutdown, the Internal Revenue Service has been operating under a contingency plan which allows for only excepted/exempt employees to remain in service.

This means that since the shutdown began at midnight on December 22, only a small portion of the IRS staff has been at their desks. Of the approximately 80,000 IRS employees on the rolls, only 9,942 — that’s 12.5 percent for you number crunchers — are currently working. These workers are considered “excepted/exempt” employees and include those IRS staff members working to implement tax reform. (Read more about what the IRS considers an excepted/exempt employee activity.)

The pain point for CPAs and taxpayers comes from the non-excepted IRS functions that are suspended during a government shutdown. These include:

  • Processing non-disaster relief transcripts, income verification express service/return and income verification services
  • Processing 1040X amended returns
  • All audit functions, examination of returns, and processing of non-electronic tax returns that do not include remittances
  • Non-automated collections
  • Information systems functions (except as necessary to prevent loss of data in process and revenue collections)
  • The closure of most headquarters and administrative functions not related to the safety of life and protection of property

An issue of timing

Once the government shutdown ends, tax practitioners may be dealing with IRS staff that haven’t received proper training. It’s also possible there will be eleventh hour tax extender legislation. In addition to these issues, many forms are still pending approval or remain in non-submittable format, so tax software will struggle to keep up.

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