End of the Government Shutdown: What’s Next for the IRS and for Taxpayers? (Part 1)

After a 35-day partial shutdown of the federal government—the longest in U.S. history—President Trump and Congressional leaders have agreed on a short-term spending bill to reopen the government for three weeks. For now, this means the IRS is officially open and back to its normal workforce capacity. What happens now? What can we expect from the IRS in the coming weeks, and what does it all mean for taxpayers going into tax filing season?

Let’s begin by combining cautious optimism with a reality check. While taxpayers have reason to breathe just a little easier, the drama here is likely far from over. Let’s take a closer look at where things stand and how the events of recent weeks could affect your tax returns.

The IRS Is Deeply Backlogged

The reopening of the government doesn’t erase the last 35 days of non-productivity. While the IRS was shuttered, approximately 5 million taxpayer letters piled up in their offices since taxpayers couldn’t reach the agents by phone. Those letters must now be answered. And that’s just the beginning; the agency also lost a significant portion of its workforce when workers began quitting during the shutdown, and they are now scrambling to hire and train thousands of temporary workers to deal with the backlog of business to be done. According to the Washington Post, watchdog organizations estimate it will take the IRS at least a year to return to a normal workflow.

The Tax Code Overhaul Will Slow Things Further

Remember that before the government shutdown, the IRS was already struggling under the weight of accommodating a complex new set of tax laws since the Tax Cuts and Jobs Act went into effect last year. Many IRS workers must still undergo training to adapt to the new tax codes, and as of early January, some CPAs were claiming they didn’t even have finalized tax forms in place to begin filing for their clients. Thus, on top of workflow backup, the new laws will likely generate even more time-consuming chaos for the IRS, taxpayers and tax preparers. Patience will truly be a virtue.

The Government May Shut Down Again

The bill that reopened the government was only a stopgap measure that expires on February 15. The White House and Congressional Democrats are still far apart on the issue of funding border security, and Trump has already expressed doubts that Congress will hand him a spending bill he can accept. If the deadline expires without a deal, the government may once again shut down, and the IRS will be back to limited capacity.

Understanding what is at stake this tax season, taxpayers would do well to file their taxes early and exercise patience in case tax refunds get delayed. Meanwhile, if you need professional help in dealing with a serious tax issue, the Highland Tax Group can help. Give us a call at  720-398-6088.