Facing the Impact of the Gov’t Shutdown
Let's talk about 2018 returns due in 2019
First of all, apologies to our clients for the delays in finalizing US returns but this is due to factors beyond our control.
USA Today recently featured a full article on the impact of the shutdown on the IRS. In short, certain forms that have changed, are not yet completed. -
"The IRS was also under stress to roll out new tax law changes that required replacing three tax returns forms – the 1040, 1040A and 1040EZ – with one new form 1040, along with creating six new schedules for certain credits and deductions. The IRS had to publish new instructions, notices and FAQs to help the public navigate the new tax code.
Because of this work, the IRS did not provide the electronic filing requirements to tax software companies like TurboTax and H&R Block until September, much later than in previous years.
“As we document in these pages, the IRS is wrestling with its workload," the report states. "With the best of intentions – namely, trying to do its job – it is making strategic decisions that ultimately burden taxpayers (and) increase its own rework. And it is experiencing a ‘cycle of frustration’ as it tries to soldier on with its important work in the midst of shutdowns and funding stops and starts.”
Let's Talk about Returns Submitted during or just before the Shutdown
There has been a new report from the National Taxpayer Advocate, an independent organization within the IRS.
IRS workers, the majority of whom were initially furloughed during the shutdown, started the tax filing season that began on Jan. 28 inundated with unanswered correspondence and calls as well as unresolved audits and identity theft cases from the prior year.
Upon returning to work, the IRS had over 5 million pieces of mail that had not been sorted for processing, according to the report. There were 80,000 responses to the fiscal 2018 earned income tax credit audits that had not been addressed along with 87,000 amended returns waiting to be processed.
Additionally, the National Distribution Center’s inventory grew to about 170,000 orders, according to the report. Despite federal employees working overtime to process about 11,000 orders a day, the IRS announced that orders on W-2 and W-3 forms were backlogged and would not ship until mid-February, even though employers were required to file these information returns by Jan. 31. The IRS recommended that employers consider filing extensions.
Due to the new tax law, the agency last year began to reshuffle resources to meet the demands of the new tax laws, including combining existing individual income form into one that would be the size of “a postcard, two pages in length,” that roughly 47 million American taxpayers — or 32% — could use to meet their filing requirements.
“The five weeks could not have come at a worse time for the IRS — facing its first filing season implementing a massive new tax law, with a completely restructured tax form,” wrote Olson.
Most IRS workers, part of the Treasury Department, were furloughed on Dec. 21 when the partial shutdown began. At the start of the year, after facing blowback over potential delays in processing refunds, the agency committed to paying out tax refunds on time.
To make that possible, an additional 36,000 federal workers were asked back to come back to work without pay to help process refunds.
The move marked a reversal of a long-standing policy that refunds due to individuals and corporations would go unpaid while the government was shuttered.
Under previous administrations, the IRS typically didn’t perform audits, pay refunds or offer assistance to taxpayers if they have questions, especially outside of filing season.
“Today’s report brings into sharp relief just how difficult it is for an underfunded, understaffed agency to function at a high level when most of its workforce was locked out for a month before the start of the filing season,” said Tony Reardon, the national president of the National Treasury Employees Union. “I don’t know how anyone can read this report and not be alarmed at the massive amount of damage that has been done to the agency’s workforce and the taxpayers they want to serve.”