After the longest US government shutdown ever, President Trump has finally given in to pressure and re-opened government, allowing the resumption of full Internal Revenue Service (IRS) for taxpayers before the April tax filing deadline
The 35-day closure has seen the IRS suspend all audit, examination and appeals activity (unless the statute of limitations will expire), while access to online filing systems have also been affected.
In addition, 90-day letters from the IRS have continued to expire over the shutdown and it is not clear how the IRS will treat expirations of response deadlines and statute of limitations during the shutdown
This suspension means that tax practitioners are unable to communicate with IRS employees to timely resolve taxpayers’ audit issues.
Additionally, Form 2848, Power of Attorney and Declaration of Representative, is not being processed but is required for practitioners to act on behalf of taxpayers.
The filing deadline for 2018 IRS income tax returns is 15 April 2019. Most expats qualify for an automatic two-month filing extension. This means overseas 2018 tax returns must be filed by 15 June 2019, although taxes due must be paid by 15 April 2019.
The American Institute of CPAs (AICPA) has written to US Treasury secretary Steven Mnuchin and IRS commissioner Charles Rettig citing a raft of problems for AICPA members dealing with client tax affairs, including continued mailing of automated notices, inaccessibility of online systems and accounts, lack of assistance and need for more Tax Cuts and Jobs Act guidance create problems.
Annette Nellen, chair of the AICPA Tax Executive Committee, wrote, ‘The need for unhindered availability of a fair and administrable tax system is rising as we approach the opening of tax filing season.’
Nellen acknowledged the ‘inherent and systemic limitations both Treasury and the IRS face during the shutdown,’ and called for additional steps to ‘reduce the harmful effect on the public’.
‘The AICPA wants to share feedback regarding the effect of the government shutdown on this year’s tax filing season. According to our members, the many IRS services and processes that are not functioning, or are not functioning at their normal levels, are creating more problematic issues.’
AICPA is calling on the government and IRS to provide automatic extension of notices and collections until 90 days from the shutdown ending date, stop assessing penalties and interest and cease sending automated notices; maintain all online systems and accounts operating effectively; provide full assistance to taxpayers and tax practitioners; and retain more IRS Chief Counsel attorneys for TCJA guidance.
The most common challenges identified by AICPA members include:
Automated Notices – IRS continues to mail automated IRS collection notices, automated warnings of asset seizures and Notices of Intent to Levy, as well as automatically transferring cases to collections, when there is no staff to respond to taxpayers’ attempted replies to resolve the issue or prevent the IRS threatened action from occurring.
IRS Audits and Appeals – IRS has suspended all audit, examination, and appeals activity (unless the statute of limitations will expire). Unfortunately, this suspension means that tax practitioners are unable to communicate with IRS employees to timely resolve taxpayers’ audit issues. Also, 90-day letters from the IRS will continue to expire and it is uncertain how the IRS will treat expirations of response deadlines and statute of limitations during the shutdown.
Online Systems and Accounts – Some taxpayers and tax practitioners are having difficulty accessing and using online accounts. Additionally, Form 2848, Power of Attorney and Declaration of Representative, is not being processed but is required for practitioners to act on behalf of taxpayers.
Limited Assistance Available – Live telephone customer service assistance for taxpayers and tax practitioners is limited, and IRS walk-in taxpayer assistance centers are closed.
Tax Cuts and Jobs Act (TCJA) Implementation Forms and Guidance Slowdown – Tax practitioners and taxpayers need more guidance from IRS for 2018 tax returns. According to the filing season contingency plan, there are only 346 excepted staff in the Chief Counsel’s office (including 56 excepted because their activities concern the TCJA). With limited staff working on TCJA implementation, a slowdown in releasing crucial guidance seems likely. Many tax forms and instructions are also still in the “draft” stage and pending approval or remain in a non-submittable format, likely resulting in problems with filing season readiness of tax preparation software.
Report by Sara White