Millions of taxpayers expect to be ready on January 29 when tax season opens, but will the Internal Revenue Service (IRS) be ready? In anticipation of a federal government shutdown, the IRS released its contingency plan for the filing season because, yes, tax season will go on even during a shutdown.
The agency said it does not “anticipate utilizing the plan” but that may be optimistic. Without a deal, the government officially ran out of money for the fiscal year and shut down at midnight. Of course, shutdown is a loaded word since not every facet of government shuts down. For example, the IRS will maintain some functions, and those are outlined in their contingency plan. Specifically, the agency notes that “If the IRS is confronted by a lapse in appropriations during the 2018 Tax Filing Season (January 1 – April 30, 2018) the IRS will need to continue return processing activities to the extent necessary to protect Government property, which includes tax revenue, and maintain the integrity of the federal tax collection process, along with certain other activities authorized under the Anti-Deficiency Act.”
The Anti-Deficiency Act (text here) is a series of laws dating back more than 100 years. The Act is codified at Title 31 (Money and Finance) and is intended to stop federal agencies from spending federal dollars that aren’t authorized, as well barring them from accepting voluntary services (meaning that employees can’t work for free during a shutdown). The penalties for violating the Act are pretty severe, which is why federal agencies provide a written contingency plan.
During a shutdown, agencies are allowed to perform activities that are supported by funding that doesn’t expire at the end of the fiscal year, as well as other activities that are either expressly permitted under the law or are deemed necessary. Sometimes those activities cross over. For example, Social Security payments are funded outside of an annual appropriation, so those employees will continue to work, as well as those IRS employees who support them (even though IRS funding is not outside of annual appropriation).
The law also allows for “activities necessary to safeguard human life or protect government property.” You might not think of your tax return as a matter of life or death but the government begs to differ: The IRS may process tax returns to ensure the protection of those returns that contain remittances (in other words, they can make sure that the government gets its money).
Here’s a partial list of functions that directly impact taxpayers and would typically be put on hold if the government shuts down:
- No tax refunds issued
- No processing of non-disaster relief transcripts
- No processing of forms 1040X, amended returns
- No non-automated collections
- No audit or examinations (some exceptions apply)
- No whistleblower office activity
Here’s a partial list of functions that directly impact taxpayers which will typically continue if the government shuts down:
- Processing of returns with payments
- E-filing
- Mailing tax forms
- Appeals (statutory deadlines will not be changed)
- Call centers (only during filing season)
- Civil and criminal tax cases
- Certain communications to taxpayers
- Active criminal investigations
- IRS.gov
To facilitate those activities, the IRS anticipates that 35,076 employees, or 43.5% of the total employee population, would be retained during a shutdown. So who stays on the job?
Top of the list is Acting IRS Commissioner David J. Kautter. The Commissioner is a presidential appointee who is not subject to furlough (furlough is another way of saying not going to work). The Commissioner’s salary is paid no matter how many hours he works, so he cannot be placed in a non-duty, non-pay status. A handful of Deputy Commissioners and Chiefs of Staff would also remain on staff or on call as needed.
Also on the “excepted employees” list are some Appeals staff and lawyers to ensure that statutory deadlines are met. Missing deadlines affects IRS as much as it does taxpayers, and the IRS is assuming that Tax Court, as well as federal and district courts will remain open. If courts do close, or if Appeals determines that staff and attorneys aren’t needed, then they would be furloughed. The same general rules apply to the Office of Chief Counsel.
Dozens of employees would stay on with the Taxpayer Advocate Service in some capacity. Specifically, Nina Olson (the National Taxpayer Advocate) will go to work, while 78 advocates will remain “on call” as needed during the shutdown.
A significant number of Criminal Investigation (CI) employees – more than 2,800 – are slated to report to work. This makes sense: If the bad guys don’t take a break, neither should those in pursuit of them. Currently, CI is working nearly 3,800 active criminal investigations with an additional 4,800 investigations in the adjudication phase (pre-indictment, indictment, trial and post-trial) in 93 judicial districts. That means that right now, nearly 9,000 investigations are in process on some level: special agents are actively gathering evidence, conducting interviews, testifying in court proceedings, executing search warrants and conducting arrests. CI will operate at close to “normal” levels since federal courts, federal prosecutors and federal law enforcement partners are operating with business as usual.
Just under a dozen employees will be needed to keep the IRS.gov website up and running. During the shutdown, taxpayers should still be able to access a number of online services, including filing tax returns and paying tax online. In fiscal year 2017, IRS.gov served over 1.8 million page views, helping drive more than 121 million form downloads and over 77.5 million payments.
More than 3,000 IT-related workers will stay in place to ensure that taxpayer data is protected and that computer systems function appropriately.
Finally, more than 10,000 Customer Service Representatives will remain in place to handle phones and paper service issues. It’s important to note that this is slated to happen only if a shutdown happens during filing season (during the 2013 government shutdown, customer service operations, including the call centers, stopped).
It’s worth noting that while this is the contingency plan, it’s not set in stone. In 2013, changes were made at the last minute, including shuttering the TAS offices.
The 2018 filing season is slated to open on January 29, shutdown or not. The IRS expects to process more than 155 million individual tax returns in 2018.
Information from The Tax Girl, Kelly Phillips Erb, Forbes