Shutdown chaos complicates IRS tax season

Shutdown chaos complicates IRS tax season
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The shutdown chaos is complicating the IRS’s work at its most important time of the year.

The agency was already busy before the partial shutdown began as it prepared for the upcoming tax-filing season, the first in which people will file taxes under many of the changes in President TrumpDonald John TrumpFeinstein, Iranian foreign minister had dinner amid tensions: report The Hill's Morning Report - Trump says no legislation until Dems end probes Harris readies a Phase 2 as she seeks to rejuvenate campaign MORE’s tax law.

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The filing season is also frequently prone to unexpected problems. Last year, a systems failure on the original filing due date caused the IRS to extend the deadline by a day.

But this year, the lapse in funding is adding new obstacles for an agency that regularly faces a host of challenges.

With the shutdown, “you raise the amount of risk,” said Mark Mazur, a former Obama Treasury Department official who is now director of the Urban-Brookings Tax Policy Center.

The shutdown began Dec. 22 and shows no signs of ending in the immediate future, as Trump and congressional Democrats remain at an impasse over funding for a wall on the U.S.-Mexico border. And the agency found itself dragged into the political fighting over the shutdown in recent days.

There had been concerns that the IRS would not be able to issue refunds during the shutdown, which Democrats were highlighting in an effort to pressure the Trump administration to reopen at least some of the federal agencies with lapsed funding.

But on Monday, the Trump administration announced that the IRS would issue refunds during the shutdown.

The IRS said that it has always believed it has the ability to pay refunds during a shutdown. The Office of Management and Budget (OMB) told the agency in 2011 not to pay refunds during a shutdown, but the IRS said OMB reviewed relevant law again and has concluded that refunds can be issued.

House Majority Leader Steny HoyerSteny Hamilton HoyerThe Hill's Morning Report - Pelosi remains firm despite new impeachment push Pelosi faces tipping point on Trump impeachment Trump urges Dem leaders to pass new NAFTA before infrastructure deal MORE (D-Md.), though, said that he didn’t think it was legal for the IRS to issue refunds during the shutdown. But congressional Democrats aren’t expected to try to block the IRS from paying out refunds while the funding lapse persists.

Instead, Democrats are trying to get Trump to reopen the IRS and other agencies. The House passed legislation Wednesday to fund the agency in a
240-188 vote, with eight Republicans bucking party lines to back the bill. But the White House has threatened to veto the bill because there’s no agreement “to address the border crisis.”

The IRS has tried to calm any uncertainty about the upcoming tax season.

The IRS last week announced that the tax-filing season would begin on Jan. 28 — roughly the same time as last year.

It also said that it is planning to recall more workers ahead of the filing season and that it’s planning to release a filing-season shutdown contingency plan in the coming days.

But Democrats and a union representing IRS employees are anxious about the fact that the plan hasn’t been released yet. And they continue to be worried about the IRS’s capabilities during the filing season, even if refunds are issued.

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Even before the shutdown started, Democrats had been nervous about the upcoming filing season. They have been worried that people will receive smaller refunds than they expected, or end up owing money instead of receiving refunds, due to new withholding guidance that the IRS issued following the tax law’s passage and the fact that many taxpayers didn’t update their withholding
allowances.

The shutdown has only amplified Democrats’ fears that people will find the upcoming filing season to be frustrating.

A group of more than 50 House Democrats, led by Reps. Jesús García (Ill.) and Lloyd DoggettLloyd Alton DoggettDemocrats seize on IRS memo in Trump tax battle Treasury Department rejects Dem subpoena for Trump tax returns On The Money: New tariffs on China pose major risk for Trump | Senators sound alarm over looming budget battles | Ocasio-Cortez, Sanders team up against payday lenders MORE (Texas), sent a letter to Trump on Wednesday voicing their concerns. They said the administration’s assurances the agency could give out refunds even before the IRS issued a plan “offers little comfort to the millions of Americans who depend on their refunds.”

The IRS has had a lengthy to-do list in preparation for the first filing season when much of the Trump tax law is applied, including updating forms and computer systems and training staff to be able to answer questions from taxpayers and tax preparers.

The Democrats said that because the IRS has many new hurdles because of the Trump tax law, such as a likely increase in the number of callers to the agency, “each day of the shutdown increases the likeliness of delayed tax returns or even erroneous tax filings.”

Tony Reardon, president of the National Treasury Employees Union, said that “even in advance of the shutdown, there were concerns about training not happening quickly enough.”

He added that he’s hearing from union members that there are reasons to be concerned that the IRS won’t be ready to start the filing season on time.

Reardon also said that IRS employees who will have to return to work during the shutdown to help issue refunds will be working without pay and facing financial burdens.

“You’re going to have a lot of employees who are going to struggle to fund gas money, bus money,” he said.

It’s also a big test for new IRS Commissioner Charles Rettig, who started the job in October.

Rettig said in a statement Monday that “IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years.” He also said that he appreciates employees’ commitment to taxpayers during the shutdown.

Former IRS Commissioner John Koskinen also sang the praises of employees at the agency.

“I’m confident that everyone at the IRS is aware of that challenge and is working very diligently to meet it,” he said of training employees to answer calls about the new tax law.