Tax filing season is due to begin in 10 days, and the Trump Administration says the IRS will be able to process returns as usual even though the service is subject to the partial government shutdown. Will the IRS deliver on that promise to taxpayers?
It may depend on who you are. If you use a paid preparer or commercial tax software, have no reason to contact the IRS for assistance, and if your return raises no red flags, filing should be routine.
By contrast, if you do try to get help directly from the agency, count on refundable tax credits to pay the bills, or if your return contains an error, filing season may get very frustrating, very fast. Many victims will be low-income tax filers who rely on free IRS assistance and whose claims for the earned income tax credit and the child tax credit may run into delays.
Practitioners say that for many—perhaps most—filers, tax season is likely to be manageable, though their refunds may take a bit longer than in the past. By deciding to bring back about 60 percent of IRS employees, the administration may have avoided some shutdown-related problems.
The IRS should have sufficient staff to process routine returns, including refunds, relatively quickly. The agency has completed most testing of its systems, and its now-recalled IT teams should keep the computers running. Says one former senior IRS staffer, “Filing season will be pretty much normal.”
But that doesn’t mean everything will run smoothly. Filing seasons inevitably hit glitches even in the best of circumstances, and this year’s tax season is not that. Last year, the agency was unable to process returns at all during part of Tax Day.
Limiting some services
This year, taxpayers surely will run into problems. And the agency’s cobbled-together shutdown plan hamstrings some key services that are important to many do-it-yourself taxpayers.
The most obvious will be limited access to any human at the IRS who can answer questions.
Last year, staffers at 371 IRS service centers helped 3.3 million taxpayers file their returns, though the centers often have been plagued by long lines and limited hours. But this year, those facilities will be shuttered– at least until the agency gets funding.
By contrast, IRS call centers will operate. However, there is a real question about how useful they will be. In a typical year, the IRS gets roughly 100 million phone calls and the centers are a critical source of help for those without computers or broadband service. Last year, according to the National Taxpayer Advocate, only about 40 percent of taxpayers who called actually got through to a live staffer and the average wait time was 23 minutes. It may be worse this season.
In past tax seasons, the IRS hired more than 10,000 temporary workers to answer phones and process some returns. With a tight labor market, it would have been hard enough to hire these low-wage staffers. But this year it will be especially difficult because the IRS won’t be able to pay them until the shutdown ends. The agency could fill the gap by reassigning permanent staff (who currently are not being paid) to respond to phone calls.
The agency also must train these workers, a process that has been delayed, and one that is even more difficult because of the many changes made by the 2017 Tax Cuts and Jobs Act. IRS morale has been low for years. This is likely to make it worse.
Adding to the challenge: Many taxpayers with very simple tax situations used to file Forms 1040 A or 1040 EZ. The IRS has dropped both, so that these filers will have to learn the Form 1040.
Taxpayers who can’t get answers from the IRS are more likely to make mistakes, and if their returns have errors, staff shortages may slow processing and delay refunds.
Already, it appears that those claiming the EITC and CTC will have to wait longer than in the past to receive refunds. The law requires the IRS to hold their refunds until mid-February, but this year the delay may last at least a month.
Volunteer income tax assistance (VITA) sites are another source of assistance for many low-income taxpayers. While those IRS-certified programs will be open for business, fewer than 5 percent of the IRS staffers the volunteers rely upon for support are being recalled to work.
The IRS should be able to process uncomplicated e-filed returns with relatively few problems. But if your return includes data that does not match what is reported on information returns such a W2, if it is bounced due to errors, fraud, or because it is caught by an identity theft filter, the IRS’s ability to process those returns may be delayed.
By figuring out a way to get about 60 percent of its staff back to work, despite the partial government shutdown, the IRS will process returns and deliver refunds this year, but don’t be surprised if taxpayer services slow and filing is tougher, especially for those least able to rely on professional assistance.