Don't Mess With Taxes

Updated Saturday, Sept. 23, 2023

Photo by Tim Mossholder on Unsplash

Sept. 30, the end of the federal fiscal year, is fast approaching. What's not moving quickly are congressional efforts to keep the U.S. government open.

The conventional wisdom is that we'll get a continuing resolution through October to give lawmakers, primarily the House that's dealing with Republican in-fighting, time to come up with a deal that the Senate will sign off on, too.

Some agencies, critical to millions of Americans, won't be affected. Notably, Social Security benefits will continue to go out, and Medicare and Medicaid programs will remain operational. So, too, will the U.S. Postal Service, which has its own revenue stream.

But other federal offices (and national parks) nationwide will close if they don't get money to run on Oct. 1.

Agencies in limbo again: This process is beyond annoying. It also conjures memories of 2018, when Washington, D.C., and the rest of the country was subjected to a 35-day government closure. It was the longest incapacitation of Uncle Sam's office in history.

The Internal Revenue Service was one of the many agencies affected five years ago. Now, it's trying to make plans in case the worst happens.

But the IRS apparently is having its own problems in deciding what to do if Congress doesn't act.

IRS reversal: The IRS initially said, per a Federal News Network (FNN) report, that it would remain "fully operational" even if Congress can't reach an agreement by the end of the month.

Today, however, the IRS apparently has reversed course. The tax agency now says, again from an FNN report today, that it will "partially close" if Congress triggers a lapse in appropriations.

Photo by Tim Mossholder on Unsplash

That lines up with the agency's prior shutdown reactions.

In 2018, the IRS furloughed nearly 90 percent of its employees, although some workers whose jobs were deemed critical were called back to offices as that standoff stagnated.

Updates from union, not IRS: Information on both the IRS 'original open and subsequent partial closure plans came from correspondence between the agency and the National Treasury Employees Union (NTEU), which represents IRS workers as well as government employees at 33 other federal agencies.

The FNN notes that in an email update to NTEU members sent today (Sept. 21), the IRS said it is "severely limited" in its use of funding from the Inflation Reduction Act to keep the agency fully open in the event of a government shutdown.

That means the IRS, like all its federal cousins, will resort to a contingency plan, which is being updated, to keep some employees on the job, while others would be furloughed.

"The IRS has yet to release its final plan, so we do not know the full scope of the impact of a government shutdown on IRS employees," NTEU President Doreen Greenwald said in a statement. "NTEU became aware from our members that the IRS was developing a new contingency plan that includes furloughing some of its workforce."

Bad tax timing: The calendar for the IRS and taxpayers is not good.

The Oct. 16 extension filing deadline is now less than a month away. While a government shutdown doesn't affect tax law or its deadlines, it will mean the IRS won't be able to process filings.

That raises concerns that automated notices could be sent to taxpayers who do file by the extension due date, as happened during the COVID-19 pandemic. Heck, even without a national health emergency, wrong tax notices go out. Just ask Californians in disaster areas.

If that happens, your good tax records of your timely filing can clear up any erroneous notices with the IRS when it reopens.

If you're in the middle of a tax dispute with the IRS and that has deadlines that might be affected by a government shutdown, talk with your tax professional — you did hire someone to help you, right? — about what it means to your case and steps to take.

A shutdown also will create a processing backlog, again, for the IRS to deal with when workers return.

My suggestion for all y'all on extension is to file before Oct. 16 (or Sept. 30) if your tax situation allows. Just in case.

I also invite you to join me in letting your Representative and Senators know that you want them to do their jobs and keep government offices open.

I'm also crossing my fingers. Hey, every little bit helps!

You also might find these items of interest:

• IRS delays are likely even though shutdown is over (Jan. 27, 2019)
• 22 35 days and counting into the longest U.S. government shutdown ever finally is over (Jan. 25, 2019)
• What unpaid IRS employees will and won't do during a government shutdown (Dec. 22, 2018)
• Tax and financial lessons from the government shutdown (Dec. 23, 2018)

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