When the government shutdown occurred earlier this year, the IRS was one of the main areas where funding stopped. As a result, the tax return process was in jeopardy. The question, at the time, was how quickly would tax refunds be processed, if at all, and how long would people have to wait to receive them.
But because of a few loopholes in the policy about government offices operating during a shutdown, the IRS has been able to stay the course, with some minor delays, in processing returns.
Prior Shutdowns and the Antideficiency Act
If a government shutdown occurs, some government areas still remain in operation. One of those areas is, of course, the IRS. In the past, the only contingency was while returns would be processed, refunds might be delayed until the government was again funded.
Your local Tax Accountant, however, is probably going to continue doing the work of helping people prepare their returns as most tax filers like to complete them as soon as the tax season starts.
Last year, 18.3 million people claimed around $12.6 billion in early refunds. This year, the IRS stated that tax filing season would begin on January 28th, despite the Antideficiency Act that states what type of work can be done during a government shutdown.
IRS Employees Still Worked
In spite of the shutdown, the Trump Administration vowed that the processing of returns and refunds would not be interrupted. This meant the IRS had to keep-on around 46,000 employees (57% of its workforce).
But those employees did their work without pay with the promise of back-pay as soon as the government was funded and operational again.
In the interim, the IRS assigned staffing to functions it deemed a necessity, such as processing electronic returns, processing returns with payments, mailing tax forms, appeals, criminal law enforcement and investigations, and technical work to maintain computer systems. Other job functions like audits, returns, non-automated collections, and legal counsel, etc., were all temporarily stopped.
The IRS Tried to Serve Taxpayers
Despite the fact it only had half its workforce in place during the shutdown, the IRS still tried to help taxpayers with any concerns they might have. 38% of calls to its Automated Collection System were answered with callers waiting close to 50 minutes. As far as the IRS’s Installment Agreement/ Balance Due line, only seven percent of calls were answered with an over 80 minute wait time.
The IRS also had five million pieces of mail that needed to be processed. And it had over 80,000 responses to the fiscal year 2018’s Earned Income Tax Credit audits that went unanswered. Add to that the 87,000 amended returns that no one addressed.
The IRS’s Old Computer System
Although it is probably one of the most important areas of the government, the IRS is highly underfunded, and this point goes beyond normal funding the agency receives when the government is fully operational. One of the areas where it is behind the times is in its computer systems, which haven’t been updated since the 1960s.
Currently, taxpayer information is stored in 60 different case management systems that aren’t linked together and the agency lacks a central database. The problem is IRS employees are unsure if they are servicing the right taxpayer accounts or not. These antiquated systems also make the audit process highly imprecise and ineffective.
Tax Reform Questions Unanswered
In 2014, the IRS instituted a policy of answering tax law related questions in a specific fashion and only during the tax season months of January through April. But the Trump Administration’s tax reform changed that policy, especially in regard to questions about the Tax Cuts and Job Acts reform.
But callers were told those questions couldn’t be answered due to budget restrictions and instead were directed to an automated answering system where they were promptly disconnected. Those taxpayers who actually got a live person were told that IRS employees had not been trained on the reforms and apologized for not being able to answer their questions.
Tax Returns and Refunds Were Still Processed
With all the problems the IRS faces with old computer systems and insufficient training on new tax laws in addition to being short of staff during the shutdown, the agency was still able to process returns and refunds, although not at the same level as the prior year. In the first week of the tax season, the IRS was still able to process 13, 306, 000 returns with 4,672,000 refunds paid out. The average refund, however, went down from the prior year from $2,035 to $1,865.00.
The government shutdown finally did end, although President Trump threatened another one might follow. Thankfully, that didn’t happen. All IRS employees are most likely back at work, but the fact remains they are plagued with old systems and not enough training about tax reforms to answer taxpayer questions.
Have you done your 2018 taxes yet? Are you worried the tax reforms of last year might make doing your tax return difficult and negatively impact your refund? It’s not too late to contact your Cedar City Accountant to help you through your federal as well as with your Cedar City taxes.