The recent federal government shutdown occurred because the U.S. Congress didn’t pass spending legislation to continue funding government agencies and operations after the previous legislation expired. Fortunately, a temporary spending law was passed after just a few days, limiting the length of the shutdown.
However, the term “government shutdown” is somewhat misleading since many federal agencies, including the IRS, remain in operation. And yes, you still have to pay your taxes.
But the IRS doesn’t stay open for business as usual during a shutdown, which would affect how your tax return is handled. If another shutdown happens during peak tax season (for example, sometime between when the IRS opens on Jan. 29 and tax day on April 17 in 2018), the impact could be much greater. Which begs the question, “What does a government shutdown mean for your taxes?”
- Refunds would not be issued
The most impactful and significant result of a government shutdown during tax season for most taxpayers is that no refunds would be paid out. And while this would definitely be bad news for those counting on their refund money right away, there are financial options so that taxpayers can get advances on their refunds quickly, even during a shutdown.
- Almost half of all IRS employees would still work
As of January 2018, 43.5% of all IRS employees would still report to work. This equates to 35,076 “exempt” workers who would carry out the ongoing duties of the IRS. These employees are exempt from furlough because of a federal law which requires agencies to continue to “protect human life and property” in case of a shutdown. And the government has legally established that tax revenues are considered federal property, which the IRS must protect during a shutdown.
- Paper tax returns with payments would still be processed
To comply with the requirement mentioned above to “protect government property” (tax revenues), the IRS is required to stay open and process all paper tax returns that include tax payments.
- E-file returns would still be processed
Electronic tax returns that are processed automatically by computer without intervention from an IRS service center would be processed up to the point of paying the refund.
- Many “non-exempt” activities would be put on hold
Normal, non-critical duties of the IRS would be discontinued during a shutdown because of the lack of adequate workers available. These activities that would be put on hold include:
- Processing paper tax returns that don’t contain payments (you may want to consider e-filing online instead)
- Processing 1040X amended tax returns
- All audit functions
- Non-automated collections
The complete IRS contingency plans for 2018 go into even more detail if you want further information. If a government shutdown does happen during tax season, IRS employees will still be working and waiting to receive your tax payments. Because no matter what, you can’t shut down taxes.
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