The government shutdown now entering its second week does more than close museums and turn national parks into uninhabited forests: It also gums up workflow for many tax preparers and often leaves their clients with questions that are growing shriller.

Calling the next few weeks “the truest of tests,” Royal Palm Beach, Fla.-based EA Jeffrey Schneider, said refund delays will likely hurt his clients most. “I am stressing direct depositing of the refund, which should not cause any delays,” he hoped.

Other practitioners were plunged into darkness during audit investigations. “The biggest affect is on my representation clients. Most of them are hanging on by a thread to know what the next step is to their case,” said Erica Barber, EA and tax manager at Mesa, Ariz.-based CD Tax & Financial.

“The government shutdown has had a serious impact on our practice and on our clients,” added John Walker, EA at J. Walker & Co., in Concord, N.H. “We do a lot of representation work that involves conferences with the Appeals Division, the Automated Collection System, the under-reporter program and the Taxpayer Advocate Service. All are shut down.”

“To make matters worse,” Walker noted, “the automated part of the IRS is still running. Clients who’ve received notices about more serious collection action by a specific date are worried.” 

The IRS has cut all but essential functions during the shutdown, including stopping refunds and closing the Tax Court while still requiring tax payments.

RTRP Kenneth Reid of MasterType Accounting & Business Services in Chicago can’t get answers for clients from the IRS “and various other federal agencies such as the [Department of Labor, the Social Security Administration] and others. My clients can’t get information or answers from these agencies either. I can’t even renew my PTIN.”

“One of my audits was canceled and I’m unable to close out another case,” said Yolanda Johnson, senior tax accountant with Tax Accountants Inc., in Orland Park, Ill. “The auditor wants me to provide her with [the client’s] 2012 return -- but since she’s not available due to the shutdown I’ll have to e-file the return.”

Boulder, Colo., CPA Christine Reiner has a similar problem with two cases. One IRS auditor is out while interest presumably accrues on the client’s debt, and “the first auditor was in a hurry trying to finish before the shut down and has made mistakes,” she said.

Johnson expressed no certainty that e-filing -- the only method of making the deadline while much of the IRS sits dark -- will ultimately work when the service resumes normal function.

 

The machine rolls on

Clients worry “the system will automatically escalate collection activity, such as issuing a wage or bank levy, when it doesn’t get a response by the required date,” Walker added. “Yet we’re unable to respond because of the shutdown -- and unable to predict what will happen when those [deadline] dates pass.”

“Those taxpayers who overpaid their taxes and are filing their returns now are surprised to learn that their refunds will not be issued timely,” added Twila Midwood, an EA with Advanced Tax Centre Inc., in Rockledge, Fla.

EA Duane Carey, in Napa, Calif., has nearly 55 returns to file prior to October 15. “I’m sitting on 20-plus 2848s that I can’t send in. My concern is that once the IRS is back online they’ll be overloaded and further delayed.”

Noted CPA Michele Knight of Knight Accounting & Technology, in Dillon, Colo., “The IRS isn’t able to answer their phones. That being said, they weren’t answering them before! For the past two months every time you call the IRS … the message says, ‘We’re sorry, due to high call volumes we cannot take your call. Please call back another time.’ During the shutdown I have sympathy, but this has been ongoing and is infuriating.”

 

Bottom line

The shutdown also stalls filing late returns at Johnson’s Illinois practice. “I typically pull wage and income transcripts for clients filing this late for two reasons: Wage and income transcripts are available and it’s better to be as thorough as possible, and people that file late typically don’t have all of their documents, so it’s an added assurance we’ve captured all of their income.”

“The IRS recently changed e-services so we can no longer process our 8821s and 2848s electronically online,” she added, “and we must submit them to the IRS for manual processing before we can pull transcripts. I have two clients that I can’t pull a transcript for because my Form 8821 is on hold due to the shutdown.”

It appears our national leaders can live with deadlock. The IRS may also still be getting checks. Some preparers aren’t. “All of this impacts my billing,” Johnson added, “because I can’t bill for work I can’t do. Some of my cases are at a stand-still.” 

Barber cited the Facebook post of Tempe, Ariz.-based The Blau Co. Ltd., by CPA and EA Aaron Blau: “Taxpayers deserve fair, consistent, and timely assistance regarding their tax responsibilities. They deserve well-trained, service-oriented and interested members of the service to be available at reasonable times. This shutdown is a disservice to the taxpayers … who want to properly pay their debt but are hurt by levies and liens served printed out by computers instead of handled by people. It is a disservice to tax professionals.

“We cannot tolerate a shutdown for much longer,” Blau writes. “This is not the IRS’s fault. Their employees put their socks on one foot at a time just like all of us. They have bills to pay. Mouths to feed. And they absorb incredible amounts of abuse (mostly undeserved) from all sides. Adding more stress will only serve to hurt the taxpayer further.”

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