Mnuchin declines to testify about shutdown impact on IRS
Rep. Richard Neal, D-Mass., the new chairman of the tax-writing House Ways and Means Committee, is planning to hold a hearing next Thursday on the impact of the partial government shutdown on the Treasury Department and what it means for U.S. taxpayers.
Neal sent a letter Wednesday night to Treasury Secretary Steven Mnuchin inviting him to testify, but Mnuchin declined to appear. Neal's office had said the hearing would give Mnuchin an opportunity to brief Congress and the American people on how his agency plans to move forward with tax filing season during the shutdown. He noted that more than 70,000 furloughed Treasury and IRS employees have already missed a paycheck, and taxpayers are facing difficulty in seeking assistance from the Treasury Department during the interruption in services.
Congressional Democrats have been locked in a bitter battle with the Trump administration since the shutdown began on Dec. 22 after disagreements erupted over President Trump's demand that Congress provide $5.7 billion in funding for a wall on the U.S.-Mexico border.
Neal expressed disappointment with Mnuchin's refusal to appear before his committee. “With more than 70,000 Treasury employees furloughed and missing paychecks," he said in a statement Thursday evening, "I strongly believe Secretary Mnuchin himself should appear before our committee and answer members’ questions. Nearly a month into the shutdown and with tax filing season rapidly approaching, the Treasury Department has announced plans to call more than 35,000 employees back to work, but has not provided details about this action to our committee."
In a letter Thursday responding to Neal's invitation, Mnuchin offered to have IRS officials appear before the committee instead and pointed out that two IRS deputy commissioners had briefed members of the committee on Wednesday about the filing season plan.
"The Department has acted in good faith to meet the Committee's legitimate need for information concerning the impact of the current shutdown," Mnuchin wrote. "If the purpose of the upcoming hearing is to inform Congress and the public, we are confident that goal will be best served by testimony by the senior Department officials with the deepest and broadest expertise on the subject of the hearing."
He offered to have the two IRS deputy commissioners testify instead of him. Mnuchin is so far the only witness who has been called to testify at the hearing, and it could be another sign of newly empowered Democrats in the House committees calling Trump administration officials to account. Mnuchin reportedly balked at testifying at a closed-door hearing last week on the Treasury's decision to lift sanctions against Russian oligarch Oleg Deripaska. In case Mnuchin declines the invitation, Neal may want to invite the new IRS Commissioner Charles Rettig, rank-and-file IRS employees, and tax practitioners to testify about their experiences.
The Internal Revenue Service announced last week that tax filing season would start on January 28, and tax refunds would be issued despite the ongoing shutdown (see Tax season to start Jan. 28, IRS confirms). This week, the Treasury released an IRS contingency plan calling for more than 45,000 of the agency’s furloughed employees to return to work without pay for filing season (see Over half of IRS staff called back for tax season, mostly without pay).
Nate Smith, director of the National Tax Office at CBIZ MHM, has seen some of the problems developing already at the IRS ahead of the start of tax season. “One thing that is being experienced is slowness or unresponsiveness in customer service,” Smith told Accounting Today. “You call somebody and ask a question. Because you were unable to do that until just recently, there’s this backlog of questions that hasn’t been answered so the personnel, who by the way are working without pay, that are answering these questions first of all have to deal with this influx of people who haven’t been able to reach them for a while. Secondly, in addition to that influx, there are simply more questions this year than there have been in years past because of the new tax law. So you’ve got more questions and you’ve got a backlog of questions. You’re simply going to have a tough time getting through to them and getting a timely response to your questions.”
Many of the IRS employees who are being called back are dedicated to working on tax season for individual taxpayers, but business taxpayers may see extra problems from the shutdown, he noted.
“On the processing of the refunds, we believe they will be continuing to issue those despite the fact that they’re in the middle of a shutdown,” said Smith. “While that has been clarified for individual filers, we actually don’t know the answer for business filers. So businesses that are filing, C corporations in particular, and are expecting refunds, don’t know. They may or may not be getting those refunds.”
Business clients who are on the receiving end of an IRS audit or demand for payment will need to be careful how to deal with the IRS. “The real concern, particularly for our business clients, is we have at any given time a number of them that are under exam, and there are questions about what they are supposed to be doing now because the audit functions of the IRS have shut down completely,” said Smith. “Those people are not back to work. If you have requests for information — they’re called IDRs [information document requests] — you receive them and they have a response date in there. Well, if that response date comes up while the IRS agent has been furloughed, you can’t communicate with them. So does the date in your IDR still apply or doesn’t it?"
Smith has some advice for them. "The best way to go about it is to plan on doing both," he recommended. "You send it to somebody, or at least try to, by the date that is specified in the IDR, and then plan to send it again when the person returns to work, whenever that happens. It kind of keeps you covered. Basically, at least for the clients I’ve been involved with, we're telling them to pretend like that date is in force and there is no extension to it. The same goes for non-audit situations. Certain taxpayers have situations where the IRS determines there’s a tax deficiency. You get a letter in the mail, and there are various stages you go through where you can contest the deficiency. Then if you don’t contest it, or if they disagree with you, the IRS will issue a demand for payment finally, and they will give you a date in that letter as to when you have to respond. It’s the same kind of situation. We are advising that you should still consider that date in force even though the person on the other end of that letter may not be able to receive the response that you’re sending by that date.”
(This story has been updated to include Mnuchin's letter and Neal's reaction.)