Don't Mess With Taxes

I'm getting a lot of feedback about the partial government shutdown, specifically about the pay status of Internal Revenue Service (and other federal) personnel who will report to work next week and those who are furloughed.

More than 420,000 federal employees who will work will do so without pay, according to a report from the Democrats on the Senate Appropriations Committee. The additional 380,000 furloughed workers head home to wait out the closure, again without pay.

Those 800,000 or so federal employees earn this week's By the Numbers honors.

Many folks objected to my description in recent government shutdown blog posts of the employees, both the essential ones who'll be at their desks and those who must stay home, as unpaid. The argument from these folks is that the workers affected by the closure will get their money once Congress and the White House agree to fiscal year appropriation bills.

I see your point … to a degree.

Official government closure payment rules: The U.S. Office of Personnel Management's Guidance for Shutdown Furloughs spells out the pay rules when we're in official Uncle Sam shutdown mode.

OPM says excepted employees, that’s those whose agencies say must report to work, will get their back pay once Congress passes and the president signs a new appropriation or continuing resolution.

As for those non-essential workers sitting at home, their back pay depends on the House and Senate. Specifically, OPM rules say, "Congress will determine whether furloughed employees receive pay for the furlough period."

That has happened in past government shutdowns. But given the current Congress or even the incoming batch of new members, I wouldn't count on a check until I had it in my hand or bank account.

So yes, they essential workers will be paid. Eventually. And non-essential workers probably will be paid. Eventually. Maybe.

But try paying your bills with that. The last time I checked, no bill issuer accepted payments based on a promise of eventual income.

No money, but bills keep coming: Meanwhile, many of the workers doing their jobs without pay or waiting to be recalled find themselves facing increasingly dire personal financial circumstances.

Some are running short on funds because, for example, they spent extra money on holiday gifts. An eventual check when you have a here-and-now bill due for something like utilities is not much good.

And that financial toll could be quite high if the closure lasts, as Donald J. Trump has threatened, a "very long time."

The IRS obviously knows that many of its workers need every bit of their regular paychecks every single pay period. The agency's closure message to its employees points out that they can call the Employee Assistance Program "at any time, day or night…. This no-cost counseling service could help address stress and other issues you and your family may face."

That acknowledgment breaks my heart, especially at this time of year.

Congressional obliviousness: Apparently, though, some members of Congress are amazed by this real-life financial fact.

Politico reporter Sarah Ferris noted on her Twitter feed that such situations seem to be news to Rep. Scott Perry (R-Pa.), who asked her "Who's living that they're not going to make it to the next paycheck?"

Adding insult to injury is the fact that this, like almost all government shutdowns, was avoidable, absurd and will end up hurting, among others, lots of folks who are just trying to make a living.

We all are at the whims of our employers, but this Washington, D.C., situation typically happens because of grandstanding by politicians who, like Perry and his Capitol Hill colleagues, don't miss paychecks and are well off enough to not have to worry if they did. 

Across the rest of the United States, however, most folks don't have any or very little financial cushion.

Needlessly forcing folks into financial distress is bad enough. Doing so during the holiday season is Scrooginess to the extreme.

Tax and financial lessons from the shutdown: I'm not here to preach or judge. I've literally lived paycheck-to-paycheck before.

Luckily, that was when I was a young single worker and was able to deal with a checking account balance that fell to less than a dollar. Yes, I am so old that I had an account when banks didn't charge if you didn't maintain a minimum balance.

But this latest government shutdown does offer all of us a couple of lessons, one financial and one tax-related.

From a general financial standpoint, if at all possible start putting some cash into an emergency fund. It could be as little as $5 a pay period. Anything is a good start to this account that can help if your car unexpectedly breaks down or, like federal workers now, you suddenly find you're not getting any income.

As for taxes, adjust your payroll withholding so that you're not paying Uncle Sam too much too soon. Yes, I know a lot of folks intentionally overwithhold so that they'll get a refund every spring. It's an easy forced savings account.

But when things like a government closure threaten the start of tax season, that could mean you'll wait even longer for your tax refund.

By changing your withholding amount, you'll get that cash in each paycheck. If you're afraid you'll just spend it, set up an automatic deposit of that money that used to go to the IRS into a savings account. Most payroll administrators and banks or credit unions will work with you here.

That recaptured withholding could be the basis of your emergency fund. And that cash will be readily accessible, not when the IRS gets around to processing your return and issuing your tax refund.

Since it's late in the year and some of you, like the unpaid federal workers, aren't in a position to make these moves now, consider putting them on your New Year's Fiscal Resolutions list. Sticking to these could really pay off in 2019.

You also might find these items of interest:

• Millions could face withholding-related tax bills next year
• Got a refund? Owe the IRS? Time for a Paycheck Checkup!
• Family-related tax law changes mean that taxpayers with dependents need to check their withholding

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