In an attempt to ease taxpayer concerns about the ongoing government shutdown and its effect on tax refunds, the White House announced this past week that it has directed the IRS to process tax returns and issue refunds as usual beginning at the end of January. The measure intends to release at least some of the pressure on Americans while Congress and the White House remain at an impasse regarding border security. It should also relieve pressure on lawmakers to rush to a deal.
While the announcement caused many taxpayers to breathe a sigh of relief, fulfilling the promise of a timely refund may still present some challenges. If the shutdown continues, we see two potential hurdles the government may face in implementing this change:
Inadequate (and Unpaid) Workforce
While there is money during the shutdown to pay refunds, there is no money to pay workers. Remember that currently 90 percent of IRS employees have been furloughed during this shutdown, and those who have been retained as “essential” staff aren’t being paid until the government reopens. The White House has authorized recalling many of the furloughed employees back to work to deal with the workload of processing returns, but as the Washington Post points out, those workers will still do their jobs without pay until the shutdown ends. Between intense workloads and low morale, one must wonder whether the IRS will logistically be able to process refunds on time despite the White House mandate.
Possible Legal Challenges
The White House decision to pay refunds may also create some legal concerns. The IRS has historically delayed processing refunds during other government shutdowns per the terms of the Anti-Deficiency Act (ADA). As the Washington Post points out, the processing of refunds during a shutdown may be interpreted as a violation of the ADA, subject to fines, criminal penalties or possibly even intervention by the courts.
The bottom line: While the White House decision to pay refunds may bring a sense of relief, it remains to be seen whether it can keep its promise. For the time being, the best course of action may be to move forward with “cautious optimism” during a fluid political situation that appears to change by the day. In the meantime, if you have pressing tax problems, the Highland Tax Group is still here to help. Give us a call at 720-398-6088.