By Rick Telberg
The government shutdown could not have come at a worse moment for the Internal Revenue Service.
The tax season will bring its annual avalanche of returns. The IRS was already working with fewer agents than it had a few years ago, and now it’s even more shorthanded.
The new Tax Cuts and Jobs Act tax code is poorly understood by agents who need to be trained and taxpayers and tax preparers who need to be informed. Even after the shutdown ends, the backlog will be overwhelming.
The biggest problem may be the uncertainties. We can think of at least 16:
- Who will answer questions about the new tax code?
- How long will it take to get those answers?
- What should tax preparers do pending answers or clarifications?
- What happens with unfinished processes (audit, appeals, discussions) that were stopped short?
- What happens with deadlines and extensions?
- Will there be penalties for errors that could have been prevented with an IRS clarification?
- What happens with amended 2017 returns?
- What happens when things that needed to be done before April 15 aren’t done?
- Are frustrated do-it-yourselfers going to swamp tax preparers with work? Are tax preparers and CPAs prepared to become de facto Tax Assistance Centers?
- What happens if furloughed workers, now expected to work gratis, start quitting?
- What the legal consequences of taxpayers suffering due to IRS negligence—the IRS lien on income or assets, the student who needed IRS information for FAFSA student aid, the company that went bankrupt for lack of reliable information, the penalties incurred due to IRS inaction, the tax preparer sued for inadvertent negligence… The list is as long as the imagination of a good attorney.
- Will replacement workers be as well prepared as the ones that quit? Will their answers be reliable?
- Will a lack of refunds stifle the economy?
- What are tax preparers supposed to tell clients about a) unanswerable questions, b) refund delays, c) returns that disappear into the IRS, d) the length of predicted delays and other problems?
- When will this all end?
- When this all ends…will it be over, or will the backlog in hiring, training, processing, decisions, rescheduling appointments, rescheduling audits, catching up on security threats, and other functions continue far into the future?
In a statement, IRS Commissioner Chuck Rettig said, “We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period.”
However, the statement also promised that “…an updated FY 2019 Lapsed Appropriations Contingency Plan [would] be released in the coming days.”
Many days have come and gone. There is a contingency plan at the Treasury Department website, but it is a plan for operating the IRS, not a plan for people who need to deal with the IRS. It seems that tax preparers are going to have to come up with their own contingency plans.