While local and federal sources say it’s too soon to tell whether early tax filers will have their tax refund delayed, both admit that if the shutdown continues for much longer, there’s a very real possibility that refunds could be held up.
The Wall Street Journal (WSJ) says that a prolonged shutdown would likely delay billions of dollars in income-tax refunds. Because of the partial shutdown, the IRS currently lacks funding. The WSJ says the U.S. tax collector is operating business with 1 in 8 employees because of the shutdown.
The White House says that tax refund checks will be sent out, even though the IRS, part of the Treasury Department, is for the most part closed.
However, Office of Management and Budget acting Director Russell Vought told reporters Monday that tax refunds will go out, contrary to previous government shutdown policies.
Like almost every other agency affected by the shutdown, time is the biggest factor in determining how severe the effects will be for both the employees who work for said agencies, and the U.S. citizens who use their services.
A shutdown that gets resolved within a few weeks should have little effect on taxpayers. However, tensions are still running high between lawmakers, and nobody is sure when a deal will be reached. The uncertainty is also creating tension for those awaiting their income-tax refund.
“They’re filing early to get their refund back because it’s a source of their savings,” says Brenda Clayton, CPA and Kentucky tax preparer in Owensboro. “Some have children and qualify for credits. It’s a savings mechanism for a lot of people.”
Clayton said those who expect a refund rely on that money for a number of important things, including buying new vehicles, putting down payments on houses, paying off holiday credit card debt and preparing for a vacation. Those who file their taxes early and, in turn, receive their refund earlier will especially feel the effects of a delayed refund.
Time is of the essence as individual income-tax filing season typically begins in mid-to-late January. The WSJ said the IRS hasn’t announced a start date for the 2019 filing season, but because so many changes have been made to this year’s tax laws, the shutdown only complicates things further for the IRS.
The economy could also hurt if the shutdown lasts much longer and delays are placed on those expecting a tax refund. The economy relies on early filers as much as early filers rely on their income-tax refund.
“I think it’ll slow down the economy [if delayed],” Clayton says. “All those early filers have committed those resources somewhere — it’s their savings plan.”
Retailers across America count on those receiving tax refunds for spending during the month of February, according to the WSJ. In contrast, people who owe taxes to the IRS usually wait until near the mid-April deadline to file.
Early filers make up a large number of Americans who receive refunds. The WSJ shows that by Feb. 2, 2018, the IRS had paid $12.6 billion in refunds to more than 6 million households. By Feb. 16, the IRS had paid $101.2 billion in refunds to almost 32 million households.
Clayton believes the IRS has enough people working to process taxes submitted by residents. Of course, the problem still lies in the fact that residents likely won’t receive their refunds until the shutdown comes to a close.
“Most of the people who file really early tend to file their own returns. They don’t necessarily need the assistance of a CPA,” Clayton said. “People who work with e-filing [in the IRS] are still working.”
The WSJ said, even during a shutdown, the IRS “still processes some tax returns that include payments, keep computer systems running and continues criminal investigations. But the IRS generally doesn’t conduct audits, respond to taxpayer questions outside the filing season or pay refunds.”
The president is set to address the nation on Tuesday night.