01.07.18 Federal Government Shutdown Impact on IRS and USDA

Source: Kristine A. Tidgren with ISU Ag Law and Taxation Center

Update: Late January 7, 2019, IRS announced that it would begin processing individual returns on January 28, 2019. The announcement also stated that IRS would be paying refunds, even if a government shutdown continues. Citing 31 U.S.C. 1324, the announcement stated that Congress has given IRS authority to pay refunds, despite lapses in annual appropriations. The notice stated that the agency would be issuing an updated Lapsed Appropriations Contingency Plan in the coming days that would include more details, including the IRS plan to recall a “significant portion” of its workforce.

Until the government shut-down is resolved, expect to hear this message if you try to contact IRS, “Welcome to the Internal Revenue Service. Live telephone assistance is not available at this time…”

IRS Impact

Only 12.5 percent of IRS employees (around 9,946) are working right now. The rest (66,942) are on furlough, pending an end to the shutdown or a new “Lapse in Appropriations Contingency Plan” calling some back to work.

In the meantime, most of the few employees still on duty are performing tasks deemed “necessary for the safety of human life or protection of government property.”

Continuing Functions Include:

  • Completing and testing upcoming filing year programs
  • Electronic returns that are processed systematically (not including the processing of refunds)
  • Processing paper returns through batching
  • Processing Remittances including payment perfection
  • Working on tax forms design and printing
  • Protecting statute of limitations expirations

In other words, a lot of information technology professional remain on duty.

These functions are not deemed essential and are currently suspended:

  • Service center processing after the point of Batching (i.e. Code & Edit, data transcription, error resolution, un-postables)
  • Issuing refunds
  • Processing Non-Disaster Relief transcripts, Income Verification Express Service/Return and Income Verification Services
  • Processing 1040X Amended Returns
  • Most Headquarters and administrative functions not related to the safety of life and protection of property
  • All audit functions, examination of returns, and processing of non-electronic tax returns that do not include remittances
  • Non-automated collections
  • Legal counsel
  • Taxpayer services such as responding to taxpayer questions (call sites) (during Non-Filing Season)
  • Information systems functions (except as necessary to prevent loss of data in process and revenue collections)
  • Planning, research, and training and development activities

In other words, you can send your payments, but you cannot receive a refund. You cannot contact IRS with questions, and you cannot conduct important functions such as faxing Forms 2848 to the IRS CAF Unit.

The tax court was also shut down beginning December 28, 2018, and “will remain closed until further notice” according to the website. Trial sessions already scheduled, however, will continue as scheduled.

Congress funded Tax Cut and Jobs Act implementation for IRS through September 30, 2019. Guidance has continued to issue. The review process currently underway for final 199A regulations is apparently continuing as well.

The IRS Contingency plan was only technically effective through December 31, 2018. As of this afternoon, however, no new plan has been issued. We are watching to see if more workers are called back as the beginning of filing season looms. We are also watching for an announcement of how the shutdown may impact the starting date of the 2019 filing season. We were already facing difficulties given the extensive nature of the new tax laws and the lack of final guidance and forms.

USDA Impact

USDA is also largely shut down. The agency announced today that the January 11 crop reports would be delayed. Market facilitation program payments were mailed before the FSA offices were closed last Friday, but applications that have not been processed are now on hold until further notice. Secretary Perdue is considering extending the January 15, 2018 deadline. Diffficulty also faces farmers seeking to pay off marketing assistance loans. Such payments cannot be arranged (to authorize sale of the crop) until FSA offices reopen.