On the afternoon of January 25, a deal was announced to temporarily restore funding to the government agencies that had been operating without it since December 22. The new stopgap funding measure will send back pay to all affected government employees (but not to federal contractors) and keep the government running until February 15.
What happens after that is uncertain.
What Do We Know Now?
There are some things we can say for sure, some things we can say that might happen, and one important thing that taxpayers can do to make sure the impact of the 35-day government shutdown on them is minimized.
It’s a sure bet that your taxes are still due on April 15, except for residents of Massachusetts and Maine (due April 16) and the District of Columbia (due April 17) and Americans living abroad (due in mid-June). Of course, if you need an extension, you can get one that’s good until October 15 so long as you make the request by the day taxes are due.
Note, though, that extensions merely give you more time to file a return; they do not excuse you from paying on time. In other words, if you believe it’s likely that instead of receiving a refund you will owe more taxes, it’s a good idea to pay what you estimate you will owe by April 15 to avoid interest charges.
During the time that portions of the government were shut down, the IRS continued to prepare for tax season. Many of its furloughed employees were recalled to work well before the stopgap funding bill was passed. So it's not as if the entire Internal Revenue Service went dark during the shutdown.
The IRS has confirmed that it will begin accepting 2018 tax returns on January 28, and this date has not been affected by the shutdown. “We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown,” said IRS Commissioner Chuck Rettig. But while it’s certain that people will receive their refunds, no one knows yet whether they will be delayed.
New Tax Laws May Complicate Filing
Complicating the situation is the fact that the IRS has had to work hard to implement the changes in the tax code, which are described by Commissioner Rettig as “the biggest tax law changes the nation has seen in more than 30 years.”
The changes include new tax brackets, an increase in the Alternative Minimum Tax Exemption, increased standard deductions and child care credits, changes in the mortgage deduction, and a lowering of the threshold amount of medical expenses that can be deducted. As a result of these changes, many Americans will receive a smaller refund this year.
These tax code changes, coupled with the lingering effects of the government shutdown, may put a strain on the IRS’s ability to process tax returns quickly.
What About My Refund?
According to the IRS, the best way to ensure that you get your tax refund on time is to file electronically. This is because straightforward electronic tax filings are processed automatically and aren’t as reliant on IRS personnel. Further, returns filed electronically are generally less likely to contain errors, omissions, and calculation mistakes, all of which can slow down the refund process.
One tax expert states that “9 out of 10 e-filed tax returns with direct deposit will be processed within 21 days of IRS e-file acceptance.” And tax prep companies have been accepting e-files since January 4th.
However, people who file paper returns, who have questions they need to ask the IRS, and whose taxes are more complex than average might experience some frustration. Those returns are processed manually. In a normal tax year, paper returns are processed in six to eight weeks. We don’t know yet if the lingering effects of the 35-day shutdown will affect the time it takes for those returns to be processed. It’s fair to guess, though, that this coming Monday, January 28, there will probably be a surge in calls to the IRS helplines, which may make getting assistance from the IRS slower than usual.
The Bottom Line on Taxes and the Shutdown
Right now, it seems likely that people who with relatively straightforward tax situations who file their taxes electronically won’t see any significant differences in how quickly their returns are processed or how fast they receive their refunds.
It’s possible that paper returns may take longer to process this year, both because of the shutdown and because of changes in the tax code. For the same reasons, it’s also possible that the IRS helplines may be busier (and slower) than usual.
The biggest uncertainty is in what happens on February 15 when the current government funding authorization expires. If another shutdown occurs then, right in the middle of tax season, the effects on taxpayers may well be more significant.
Until we know more, the smartest advice from both the IRS and tax prep companies is to file early and file your taxes electronically if possible.