The looming threat of a government shutdown has prompted federal agencies, including the IRS, to prepare for the worst. The Department of Treasury has now released its contingency plan for the IRS, outlining how the agency will operate if a shutdown occurs. This article provides an in-depth look at the key elements of this plan and its implications for taxpayers.
The possibility of a government shutdown became more pronounced when federal workers received notifications on September 28, 2023, signaling its likelihood. The Department of Treasury’s contingency plan, which was previously missing from the list of agency plans, was subsequently made available with a timestamp of September 28, 2023.
IRS Employee Status
The new IRS contingency plan presents a stark contrast to the previous year’s plan. Key points include:
Furloughs: A significant portion of the IRS workforce, approximately 59,981 out of 89,944 employees, will face furloughs, ceasing most core tax administration functions.
Continued Operations: About 30,063 IRS employees will continue their services. This includes 14,742 employees funded outside of appropriations and 2,800 employees supporting the Inflation Reduction Act initiatives. The remaining 15,321 will handle shutdown duties and other essential activities.
Key Personnel: IRS Commissioner Daniel Werfel, along with a select group of Deputy Commissioners and Chiefs of Staff, will remain on duty. The Taxpayer Experience Office and the Transformation and Strategy Office will also retain some of their staff.
Legal Deadlines: Some Appeals staff and lawyers will stay on to ensure statutory deadlines are met, given the assumption that federal and district courts will remain operational.
Taxpayer Advocate Service: Erin Collins, the National Taxpayer Advocate, along with 78 local advocates and support staff, will continue their services.
Criminal Investigation (CI): Over 3,000 CI employees will remain active, given the ongoing nature of criminal investigations and the need for law enforcement continuity.
IT and Customer Service: Nearly 5,000 IT workers will ensure the protection of taxpayer data and system functionality. Additionally, over 10,000 Customer Service Representatives will handle phone and paper service issues, especially if the shutdown coincides with the filing season.
Despite the shutdown, certain taxpayer-related activities will persist:
- Completion and testing for the 2024 Filing Year programs.
- Processing of checks, payments, and disaster relief transcripts.
- Mail processing, especially for payments.
- Responding to taxpayer queries during the filing season.
- Protection of statute expiration, bankruptcy, liens, and seizure cases.
- Design and printing of forms for the upcoming tax year.
- Maintenance of criminal law enforcement and undercover operations.
Several IRS functions will cease during the shutdown:
- Processing of non-disaster relief transcripts.
- All audit functions and return examinations.
- Non-automated collections.
- Legal counsel for non-essential activities.
- Taxpayer services outside of the filing season.
Delving Deeper into the Specific Impacts of the Shutdown on Taxpayers
The looming government shutdown and the subsequent IRS contingency plan will have tangible effects on taxpayers. While the broader strokes of the plan have been outlined, it’s essential to understand the specific impacts that these changes might have on the day-to-day interactions taxpayers have with the IRS.
One of the most immediate and noticeable impacts will be the reduced capacity of the IRS to handle phone inquiries. Outside of the filing season, the IRS typically answers approximately 46,000 phone calls per day. With the shutdown, this number will drastically decrease, leaving many taxpayers without the guidance or clarifications they might be seeking. This could lead to confusion and potential missteps in tax filings or payments.
Closure of Taxpayer Assistance Centers
The nationwide network of 363 Taxpayer Assistance Centers (TACs) provides face-to-face service to taxpayers, averaging around 5,000 interactions daily in October. These centers offer invaluable assistance, especially for those who might not be tech-savvy or those with more complex tax situations. Their closure means that taxpayers will lose a vital resource for personal assistance, further complicating their tax-related tasks.
Refund Processing Delays
For many, tax refunds are a much-anticipated financial boost. However, during the shutdown, the processing of these refunds will be limited. Only those refunds from e-filed returns that are error-free and set up for direct deposit will be processed. This limitation can affect cash flow for individuals and families relying on timely refunds. Moreover, with 10.5 million individual 1040 filers on extension through the October 16 deadline, the volume of potential delayed refunds is significant.
Extended Response Times for Paper Correspondence
Taxpayers who have mailed in queries, forms, or other correspondence to the IRS should brace for longer than usual delays in responses. The IRS will not be processing paper correspondence during the shutdown. This halt can be particularly challenging for those involved in ongoing discussions or negotiations with the IRS, as it might prolong resolutions.
Unchanged Filing Deadlines
Despite the operational changes and reduced capacities, the IRS has made it clear that filing deadlines will remain unchanged. Taxpayers with a valid extension for the 2022 tax year are still expected to adhere to the October 16, 2023, deadline. This unchanged deadline, combined with the reduced support from the IRS, underscores the importance of taxpayers being proactive and seeking external professional help if needed.
While the IRS contingency plan provides a framework for the agency’s operations during a potential shutdown, the situation remains fluid. Taxpayers should stay informed and be prepared for changes. It’s essential to continue meeting tax obligations and seek professional guidance when needed.
If you have questions about your tax obligations or need assistance with tax-related issues, consider seeking professional advice. Click here or call (800) 875-5509 to connect with a tax specialist who can guide you through the complexities of the tax system.