How will a government shutdown affect tax returns?
A temporary federal government shutdown can cause disruptions and delays. Find out how a government shutdown could affect tax returns.
Summary:
The IRS offers limited services during a government shutdown.
You should submit your tax return as normal.
Processing, query responses, and refunds may be delayed.
The IRS has a shutdown contingency plan in place.
Would a government shutdown affect my tax return?
A tax return is filed with the Internal Revenue Service (IRS) and is a form (or forms) that reports income, expenses, and other relevant tax information. Your tax return is an opportunity to calculate your tax liability, plan tax payments, and request refunds for taxes you overpaid. In the US, individuals and businesses with reportable income such as capital gains, dividends, interest, other profits, and wages must file tax returns with the IRS or with the local or state tax collection agency.
A partial or total government shutdown, such as the partial shutdown from December 22, 2018, to January 25, 2019, can disrupt the service of federal agencies. Considering these events are possible, the question is how a government shutdown will affect tax returns.
As we saw in the last partial shutdown, the IRS did not stop working completely. Like several other federal agencies, the IRS never stops working during a shutdown, even if some employees are furloughed or some services are delayed or interrupted.
We’re here to give you a better idea of what to expect if there’s an IRS shutdown in 2023 and how you can overcome some of the challenges that you could encounter.
How could a government shutdown affect the IRS?
One of the first questions that tax-conscious Americans ask in the event of a government shutdown is, “Is the IRS shutdown?” Whether the government shuts down partially or totally, the IRS will continue to work in a limited way, so the shutdown will not affect your tax return or your tax refund.
The impact of an IRS shutdown is uncertain – and it’s not impossible you could find yourself facing this situation. The National Treasury Employees Union (NTEU) confirmed that the IRS could close in the event of a shutdown and that the full impact of this happening is yet unknown. Some potential effects include:
Longer waits for e-file processing: If you submit via IRS e-file during shutdown 2023 and your file requires further processing, you will wait longer for any issues to be resolved.
Longer waits for refunds: If you file paper tax returns, you will wait longer for a refund.
Increased IRS backlog: The IRS had a backlog of 2.6 million returns at the end of the 2023 filing season, which ended mid-April, meaning that the existing backlog will increase significantly if the government shuts down.
Walk-in centers closed: IRS walk-in taxpayer assistance centers will be closed, and appointments or meetings related to audits, collection, Appeals, and Taxpayer Advocate cases will be canceled and rescheduled.
What are the ongoing concerns about IRS tax?
As the full extent of how a government shutdown will affect tax returns with regard to processing, refunds, and related matters is unknown, uncertainty is the greatest concern for many Americans.
Some of the biggest ongoing concerns include:
Whether people and businesses can file paper returns
Whether e-file returns will be processed
How canceled and rescheduled meetings will affect people
How long it will take to receive refunds
Whether people will be able to receive assistance during a shutdown
Does the IRS have a contingency plan?
Given the possibility of a government shutdown, the IRS released a Fiscal Year 2024 Lapsed Appropriations Contingency Plan in September 2023.
According to the contingency plan for a possible IRS shutdown in 2023, 33.4% of IRS employees will be designated as excepted/exempt and will be retained during the non-filing season from October through December 2023. The IRS will also continue implementing green energy credit provisions, as well as activities linked to implementing the direct file pilot program and the IRS IRA strategic operating plan.
How could this government shutdown affect you?
Despite the IRS continuing with some operations during the event of a government shutdown, the situation still could affect you in various ways. Let’s take a closer look:
Delays if you have questions: If you have questions you need to ask an IRS employee over the phone, you might need to delay filing your taxes
Uncertainty regarding appointments: Any appointments you’ve made with IRS employees or officials will be canceled, and you may need to wait for them to be rescheduled.
Limited responses to telephonic queries: Business taxpayers and exempt organizations, retirement plan administrators, governmental entities, and identity theft victims might not be able to receive live telephonic assistance.
Paused correspondence and legal counsel services: The IRS might not work on paper correspondence or offer legal counsel services.
What can you do to combat it?
Even in the event of a government shutdown, you should continue to fulfill your tax obligations by the deadline.
However, there are several ways you could combat some of the potential issues that arise during a shutdown:
Submit your return via e-filing: As the processing of paper returns would be delayed, consider submitting your return via IRS e-file during shutdown 2023.
Visit the IRS website for answers: If you have questions about completing or filing your return, check for answers on the IRS website.
Ask tax practitioners or a trusted financial advisor for assistance: A trusted financial advisor, tax practitioner, or a tax software company can assist you with taxes.
How can I better manage my taxes?
The uncertainty of how a government shutdown will affect tax returns can be unsettling. Rest assured, however, that the IRS will continue to function on a limited basis until the end of the shutdown period. If there is a shutdown, you should continue to file your tax return as normal, although you may need to wait for further processing, responses to queries, or a refund.
You can better manage your taxes with the guidance and help of an SEC-regulated financial advisor. Let Unbiased find an advisor you can trust to help you navigate your way through income tax as well as all things IRS-related. Get matched with an advisor here.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.