For some, those two words bring the promise of a nice cash influx (whether you’re the taxpayer or the one being paid by the taxpayer to prepare for that nice cash influx). For others, those two words bring stress, confusion, anxiety and a dent in the checking account.
This year’s tax season presents some special challenges with the stops and starts of the shutdown of the federal government and new rules and regulations that are being put into place for the first time.
On the second day after the shutdown was lifted, fewer than half of 26,000 furloughed IRS employees who were recalled to work during the government shutdown to handle tax returns and taxpayers’ questions had returned to their jobs, according to congressional and government aides.
President Trump’s administration had said that taxpayers owed refunds would receive them on time. But, at the time, about 14,000 recalled employees hadn’t reported to work, IRS officials told House committee staffers, while around 5,000 of them have sought permission under their union contract to be absent because of financial hardship. The remaining 9,000 couldn’t be reached by IRS managers.
The many employees staying off the job, some with managers’ approval under their contract, makes the possibility of delayed tax refunds loom larger. Already, the partial government shutdown and the complexities of a complicated new tax law have burdened an Internal Revenue Service that has been starved for funding for years.
About three-quarters of U.S. taxpayers receive annual refunds. Lower-income households, in particular, depend on refunds as their biggest cash infusion of the year.
Beyond refunds, as of press time, no audits of tax returns were being done because the IRS auditors all remained furloughed.
But according to Carl Garner, CPA, a Partner with Cumberland area accounting firm Mauldin & Jenkins, the delays with the shutdown might not have as much of an impact on returns as you think.
“This has put them behind to some extent and that might affect how they look at returns but, other than that, I’m not so sure it will have that big of an impact on whether something is overlooked or not,” he said. “For the most part, the IRS had a skeleton staff that continued to work. The ones who were working on the technology side and regulations side were still working. But we do have some clients who had issues with the IRS and all of that was stopped. I’m not sure when that will pick back up. We did on occasion reach someone (during the furlough), but it was very difficult and very limited. The telephone support was gone.”
When it comes to what will and won’t have an effect, however, recent tax law changes are a different story.
“These will have an effect,” Garner added, who has been a CPA for nearly 40 years, much of that time with Mauldin & Jenkins. “The biggest change - and it’s actually hard to get your arms around - is a new 20 percent deduction for non-corporate business taxpayers. It’s somewhat complex. The IRS has just issued final regulations a little over a week ago, so we’re just now trying to get our arms around it. We’ve been reading the law and the issues since it was passed this summer and you think you understand it but now it’s like, we have to start putting this on tax returns, so there are a lot more questions than answers.”
Garner said examples of those affected would be someone who has their own business that’s not incorporated, a partner in a partnership or someone who owns an S corporation in which shareholders pay the taxes.
“When reform was going through congress, they reformed the corporate tax structure, but then the small business owners said they’re not set up that way. They pay individual rates, and argued that they needed a break, too. So then the Senate came up with this 20 percent deduction for certain businesses,” Garner said.
“For the most part, we’re just now getting to prepare individual returns,” he added. “We do expect most of our clients to have a reduction in income tax. Most corporations have seen reductions for sure, but projections for individuals, we expect that they will see reductions as well.”
Bottom line: Yes, you still have to pay your taxes. Yes, you will still receive a return (if you’re eligible for one). And, yes, if you owe money to the IRS, you’ll still owe.
But if you think you’re one of the millions of people who could be affected by tax law changes, your best bet is to find a tax adviser to make sure you’re on the right track. Although they might not be working as much, or at all in the current environment, there will always such a thing as an auditor.