Doubts grow over IRS refunds during shutdown

Despite assurances from the US government, there is growing concern that billions of dollars in tax refunds from the Internal Revenue Service (IRS) will be delayed until the shutdown ends, potentially causing hardship for thousands of US taxpayers

Deputy director of the office of management and budget, Russell T. Vought, said that tax refunds will continue to be processed despite a shortage of available staff caused by a political dispute over the border wall. Speaking to reporters, he said that ‘the refunds will go out as normal. There is an indefinite appropriation to pay tax refunds’.

However, he failed to provide more detail as to the agency’s contingency plans or when taxpayers should expect to receive refunds.

More than 800,000 federal workers are currently either furloughed or working without pay, with only 12% of IRS staff currently active. During a lengthy shutdown the IRS may recall a large number of furloughed employees to process returns, probably without pay, in accordance with its contingency plans.

House ways and means committee chairman Richard Neal has called on the IRS to explain what the impact of the shutdown will have on the upcoming tax season, noting that the agency’s actions are ‘causing undue hardship to American taxpayers and the IRS civil servants’.

In a letter to treasury secretary Steve Mnuchin, he asked to be provided with information as to ‘when the IRS will begin accepting and processing individual tax returns. If the tax filing season will open after January 29, 2019, please provide the specific reason for the delay and the portion attributable to the lapse in government funding’.

‘Please confirm whether the IRS will issue federal tax refunds at any time during government shutdown. If so, please provide the anticipated date when the IRS will begin issuing refunds’.

He also asked for ‘a statement as to whether the IRS will move to implement a filing season contingency plan for fiscal year 2019. If so, please provide the date of the move and when this contingency plan will be made public’.

The filing season beginning in January 2019 marks the first under the Tax Cuts and Jobs Act, the biggest change to federal tax law since 1986.

The new tax code roughly doubled the standard deduction to $12,000 (£9,400) for single people and $24,000 for married couples filing jointly, as well as limiting a number of itemized deductions, including placing a $10,000 limit on the amount of state and local taxes filers can deduct.

Report by James Bunney

James Bunney

James Bunney, Accountancy magazine and Accountancy Daily...

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