The federal government narrowly escaped a shutdown this past weekend after a stopgap was passed at the eleventh hour. The temporary spending bill only funds the government through Nov. 17, saving the day for tax extension deadlines, but begs the question, “What happens next?”
The Internal Revenue Service (IRS) seems to be marginally improving their response times over the last months following a big boost in their budget this year. But after the announcement to bring on over 10,000 new employees, a government shutdown could leave more than 60,000 at the agency furloughed.
While the hopes are now higher that legislators will reach a permanent agreement before the November deadline, tax preparers should consider the potential impact to their clients and practices.
In the event of IRS agents being furloughed due to a shutdown, more than 300 centers nationwide will close. That means taxpayer and practitioner hotlines go unanswered until federal employees can go back to work. Normally, the IRS answers nearly 50,000 calls in October alone. What’s worse for your clients? Refunds would not be processed unless they are on error-free e-filed returns with direct deposit.
Preparers should be keeping a close eye on the Oct. 16 filing deadline. Many states throughout the country are eligible for further extensions due to recent hurricanes and flooding. Disaster zones have extended filing deadlines ranging from November through February currently.
Tax preparers may want to continue to encourage taxpayers to meet the October deadline anyway, ahead of any potential shutdown issues that we may face again in November.
Additionally, preparers should prioritize any needed communications with the IRS. If possible, submit power of attorney forms to the CAF unit and make phone calls in the next 45 days to address any time sensitive issues. During a furlough for a government shutdown, the agency will receive mail but it will not be processed and taxpayers will not receive responses.
A shutdown so close to year end is certainly concerning for more than the obvious reasons we stated. The IRS also is in the middle of preparing for the 2024 filing season and getting behind right before January should raise some eyebrows for tax preparers.
The moral of the story? We’re not out of the woods until a permanent budget is passed for the government’s full fiscal year.
Preparers should tread with caution for any work that might not be done until after the Nov. 17 stopgap and prepare taxpayers for potential delays.