Tax season opens with shutdown over
The Internal Revenue Service began accepting tax returns Monday, with employees returning to work after a 35-day partial government shutdown.
The IRS will be dealing with a backlog of millions of unanswered tax inquiries that arrived during the shutdown and could not be responded to, and the National Taxpayer Advocate reportedly estimated it will take at least a year for the IRS to return to normal operations, according to the Washington Post.
In addition, most IRS employees will have to wait until later this week to collect their paychecks as the federal government’s payroll system slowly resumes operation. Even though the IRS recalled over half of its workforce, approximately 46,000 out of 70,000 furloughed employees, during the shutdown to deal with tax season and implementation of the Tax Cuts and Jobs Act, thousands of employees reportedly took hardship exemptions because they could not afford to go to work. At least 14,000 of the recalled employees didn’t come to work last week, according to Politico and the Washington Post.
The TCJA will mean major changes for both taxpayers and tax preparers this year, with many traditional deductions either eliminated or scaled back, like the $10,000 limit on the state and local tax deduction. The 2017 tax overhaul got rid of personal and dependency exemptions, but doubled the size of the standard deduction and the Child Tax Credit.
The changes in the Tax Cuts and Jobs Act, and confusion over the withholding tables, are expected to result in millions of taxpayers who will end up owing taxes this year if they did not change their withholding allowances to account for the elimination of personal exemptions. That means that while take-home pay on paychecks may have increased last year because of the tax overhaul, many taxpayers who are used to receiving tax refunds during tax season will instead find out they owe taxes once their tax returns are prepared. Another uncertainty is the threat of another government shutdown if President Trump and lawmakers in Congress can't reach an agreement on border security.
“IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years,” said IRS Commissioner Chuck Rettig earlier this month when he confirmed that tax season would start on Jan. 28 despite the shutdown (see Tax season to start Jan. 28, IRS confirms).
"I am extremely proud of the entire IRS workforce," Rettig said in a statement Monday as the IRS formally kicked off tax season. "The dedicated IRS employees have worked tirelessly to successfully implement the biggest tax law changes in 30 years and launch tax season for the nation. Although we face various near- and longer-term challenges, our employees are committed to doing everything we can to help taxpayers and get refunds out quickly."
Now that the government shutdown has ended, the IRS is working to resume normal operations. “The IRS will be doing everything it can to have a smooth filing season,” Rettig said. “Taxpayers can minimize errors and speed refunds by using e-file and IRS Free File along with direct deposit.”
The IRS anticipates the first refunds will go out during in the first week of February and many refunds will be paid by mid- to late February, as in previous years.
Tax prep software companies and the IRS are accepting tax return filings now that tax season is open. The IRS is strongly encouraging taxpayers and preparers to file tax returns electronically to minimize errors and speed up refunds.
The IRS is expecting more than 150 million individual tax returns to be filed for the 2018 tax year, with most of those coming before the April tax deadline. The filing deadline to submit 2018 tax returns is Monday, April 15, 2019, for most taxpayers, but because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in those jurisdictions will be able to wait until April 17 to file their returns. Taxpayers can also file for a six-month extension to file their taxes, but they still will need to pay any taxes owed.
The National Association for the Self-Employed, an advocacy group for entrepreneurs and sole proprietors, is urging taxpayers to file their taxes early in case of another government shutdown in three weeks. “With today’s official opening of IRS income tax filing season and the looming threat of a possible second government shutdown, we are encouraging small business owners to start preparing their income taxes today,” said NASE president and CEO Keith Hall in a statement. “With the nation’s sweeping tax reform law in full effect for this first time this year, many small-business owners understandably have questions about how changes to the Tax Code will impact their returns. Long wait times for answers to critical questions small-business owners have about filing for the first time under the new law are already being reported and should be expected for the remainder of the season. The government is officially back open today, the first day of income tax filing season, but small-business owners should brace themselves for a tax season filled with frustrations and delays.”