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White House: IRS can issue tax refunds even amid government shutdown

A thinly-staffed Internal Revenue Service will issue refunds, the White House said. But how will the IRS process returns?

A portion of the 1040 U.S. Individual Income Tax Return form for 2018.
A portion of the 1040 U.S. Individual Income Tax Return form for 2018.Read moreMark Lennihan / AP
    by Erin Arvedlund
    Updated 
    Published 

In spite of the ongoing government shutdown, the Internal Revenue Service will issue refunds to taxpayers even if the federal government doesn’t reopen into the filing season, the White House said Monday.

“Tax refunds will go out,” the acting director of the White House Office of Management and Budget, Russell Vought, told reporters at a briefing.

But it’s unclear how the IRS will issue refunds without the staff to process taxpayer returns.

Due to the shutdown, a thinly staffed Internal Revenue Service said last week it wouldn’t be able to issue refunds and other functions. But political pressure prompted the Trump administration to reverse that policy.

As tax season begins to roll around, the IRS is not responding to taxpayer questions. Also, the IRS as of Monday still has not announced an official start date for the 2019 filing season. Typically, the start of the tax-filing season begins in mid to late January.

The IRS continues to operate on a partial basis from funds not tied to its expired annual appropriations. While tax-reform implementation is funded through September 2019, this year’s tax-filing season is up in the air.

The IRS released a Fiscal Year 2019 Lapsed Appropriations Contingency Plan before the shutdown, but it accounted only for IRS operations during the first five days of lapsed appropriations.

Under that plan, the IRS will continue to process certain tax returns with payments and accept disaster relief-related transcript requests. However, several key operations would be discontinued during the 2019 tax-filing season if the shutdown persists.

Generally, IRS functions include:

  1. tax refunds

  2. processing of transcripts (except related to disaster relief)

  3. audits

  4. processing amended returns or Form 1040X

Tax refunds generally are not issued until 15 to 30 days after taxes are filed.

In addition, this year’s refunds will likely be smaller, said David Zalles, a Blue Bell CPA and tax preparer.

“Most people used to getting a refund of $2,500 to $3,000 in prior years may be in for a big surprise when they prepare their 2018 tax returns,” he said. Because of the latest Trump tax reforms, the new Tax Cuts and Jobs Act limits many deductions and eliminated personal exemptions.

“The average reduction in federal income-tax withholding will probably result in limited refunds for most low- and middle-income taxpayers," Zalles said.

For those wishing to learn more about the new tax code, there are several upcoming seminars in the area. THe PICPA will host a seminar Thursday, Feb. 7, at Spring Mill Manor. For more information, or to register, visit the PICPA’s website: https://www.picpa.org/courses/course?id=33261.