UPDATE: Jan. 7 ― The IRS will likely begin paying out tax refunds in the coming weeks after the White House decided to reverse past IRS policy on Monday, according to The Washington Post. Previously, the IRS was prohibited from issuing refunds during a shutdown while the majority of employees were on furlough. However, Trump administration lawyers decided it was legally permissible to proceed with processing tax returns. The IRS employees who return to work in order to process these returns will not be paid during the shutdown. Final details are still up in the air, including how many workers will be recalled and when the official tax filing season will begin.
PREVIOUSLY: Today we reach the two-week mark of the partial government shutdown, the result of a standoff between Congress and President Donald Trump over funding of a border wall that he originally said Mexico would pay for.
In addition to the 420,000 government employees who continue to work without pay, the shutdown has left an estimated 380,000 government workers on furlough, including nearly all Internal Revenue Service employees.
So what does that mean for your taxes? As you might have guessed, it’s not great news.
How The Government Shutdown Affects Tax Refunds
According to the government’s shutdown plan, only 12.5 percent of IRS employees are authorized to work during the current “non-filing season.” The plan also states that processing certain tax refunds and issuing tax refunds are “non-excepted” activities during this time, meaning that the employees responsible for performing those duties will be furloughed during the shutdown.
Jay Williams, a West Virginia-based financial adviser who focuses on tax-advantaged investing, noted there are a few exceptions. Specifically, the government will continue processing of returns that are deemed “necessary for the safety of human life or protection of government property.”
Currently, there’s no official plan for how tax returns would be handled in the event that the shutdown extends into tax filing season, which begins Jan. 15 ― an unprecedented situation, according to Fox Business.
So what does this mean for the majority of taxpayers expecting a refund? “The government shutdown won’t impact the ability to submit a tax return, but it will impact the issuance of refunds,” said Jeff Fosselman, a certified financial planner, certified public accountant and senior wealth adviser at Relative Value Partners. “Refunds don’t start getting issued until mid-January, so depending on how long the shutdown lasts, this may or may not impact early filers.”
Williams predicts that if shutdown lasts past Jan. 15, the potential delay would be one and a half days for every one day of continued shutdown. “Past February 1, that delay could balloon to an extra two days per one day of shutdown,” he said.
And if the shutdown rolls into March ― Trump threatened Friday to continue for “months or even years” ― there’s really no telling what could happen. “Playing catch-up could be a nightmare for the IRS and consumers,” Williams said, noting that the issue would disproportionately affect Americans in lower-income brackets who count on refunds to pay down debt, save money or simply stay afloat.
What If You Owe Taxes?
Here’s the real kicker: Though Uncle Sam could indefinitely dole out IOUs to tax filers awaiting refunds, those who owe taxes will be expected to pony up by the usual deadlines, regardless of whether or not the government is shut down.
“There’s no language in the IRS plan for a shutdown that calls for payments to be withheld or delayed,” Williams said. “Filing deadlines most certainly still apply, and the IRS takes postmarks very seriously.”
Even so, if you have any questions or concerns about how to approach filing your taxes, Williams said you should talk them over with a tax professional.