Bailey Scarano Blog

The IRS Severely Impacted by the Government Shutdown

I’m sure many of us have fantasized about the IRS closing down at one point or another, but the reality is not the tax-free party we visualized. Down to approximately 40% of their regular workforce, the agency is running on bare bones. The longer the shutdown lasts, the worse it is going to get for all of us.

Phone Lines Closed

As tax filing season approaches, you (and we) are out of luck if you have a question about your return that needs IRS input. Typically, you could just call the IRS, sit on hold, ask a question, and get an answer. Even the Practitioner Priority Service – a number tax professionals use to solve complicated tax issues for clients – is down. Filing season starts in late January, so a prolonged shutdown could have a big impact, particularly since there are so many questions around the Tax Cuts & Jobs Act (TCJA) that was passed earlier in 2018.

Harder to Get a Home Loan

Banks and other home loan lenders often require a Form 4506-T issued by the IRS to verify income. This is particularly true for people who are self-employed or retired, since W-2 forms aren’t as readily available. In fact, the only forms the IRS is issuing during the shutdown are those related to disaster relief efforts, so you will have to wait it out if you need an official document that only they can issue.

Possibly Delayed Refunds

The latest news on refunds is that they will continue to be issued, but we expect that there will be some unavoidable delays with such a short staff. In past shutdowns, tax refunds were not be issued at all. According to Bloomberg, this decision was made, in part, to remove the “excruciating pressure” to reopen the government. “If refunds won’t be held hostage, the shutdown effects will be felt much less widely, relieving some of the strain on Congress and Trump to resolve the current impasse over money for a wall on the Mexican border.”

You Still Have to File

Even though they are functioning with a greatly reduced staff, this doesn’t mean you can get out of paying your estimated taxes, payroll tax deposits or anything owed to the IRS. The majority of federal revenues come from income and payroll taxes, so not collecting would make the current situation much worse. The employees that are on hand at the agency (currently working without pay) are those that are creating the 2018 tax forms, overseeing electronic returns, and other high priority tasks, so don’t think this means you can delay getting everything in order to file your returns.

Of course, if the government reopens soon, these issues should be mitigated. This is a developing situation, and we will do our best to keep you updated on any changes and what they mean for you.