Tax Refund During a Government Shutdown: It is less than two weeks until the first of two deadlines that Congress must meet to enact a planned federal spending package that is worth $1.66 trillion before the government runs out of money on March 1. If a budget agreement is not approved by this date by both the House of Representatives and the Senate, as well as by Republicans and Democrats, then a large number of federal agencies, including the Internal Revenue Service, may be forced to shut down until the House and Senate can pass a measure.
If you file your taxes during that period, what happens to the refund that you are entitled to? Because there has never been a loss in funding during tax season, we are unable to look back at what occurred during a previous government shutdown as an example; however, we will assist you in understanding what implications this may have for you.
What we know about what would occur to the Internal Revenue Service (IRS) if the government shuts down in March is as follows: Read on to learn more about what happens to Social Security payments and other benefits provided by the government while the government is shut down.
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Why are we raising the possibility of a shutdown?
The beginning of October in one year and the end of September in the next year are the beginning and end points of the fiscal year budget for the federal government. During many years, Congress either passes a series of appropriations measures to fund the government for an additional year before the deadline for the fiscal year, or if it fails to meet the deadline, it agrees to fund the budget in the short term while it works out a long-term accord.
During the previous year, Congress was unable to reach a consensus on a budget by the end of September. As a result, they passed several short-term financing bills to keep the government operational while they worked on the budget. As part of the agreement for short-term funding, Congress decided to provide funding for certain government departments, such as Agriculture and Transportation, until March 1.
Additionally, it chose to provide funding for the remaining departments and services, such as Defense and Justice, as well as financial services which include the Internal Revenue Service, until March 8. If we approach those March dates and Congress has not yet provided funding for the government, the law requires that those elements of the government that have not been provided funding undergo a temporary shutdown.
How likely is it that the government will shut down in March?
All of this is contingent on whether or not Congress can enact a federal spending bill, either for long-term funding that will continue through the end of the fiscal year or for additional short-term funding that will buy the two chambers of Congress more time to agree together. The latter scenario would merely cause a delay in the process of budgeting, but it would at least provide the Internal Revenue Service with additional time to process the majority of tax returns.
As the deadline draws closer, Representative Tom Emmer, a Republican from Minnesota, has stated that the House of Representatives will not adopt another short-term budget package to prevent a shutdown of the government. In an interview with Bloomberg News on February 15, Emmer stated, “You are not going to get another [short-term spending bill] out of our conference in Congress.”
To prevent a shutdown of the government, Congress has already enacted three interim funding bills for this budget, so it is not out of the question that Congress might take additional action.
During a shutdown, would the Internal Revenue Service entirely shut down?
During a shutdown, the Internal Revenue Service (IRS) is not typically entirely shut down. Tracey Spivey, a partner at the accounting firm KPMG, informed CNET that the agency frequently departs with a well-equipped skeleton crew to maintain some of its crucial operations.
According to Spivey, the aim is that all personnel of the Internal Revenue Service will be exempt from a hypothetical shutdown, as has been the case in the past. Having said that, it is quite probable that certain sections of the Internal Revenue Service will be unavailable during a shutdown.
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As a result of the Inflation Reduction Act, certain vital functions of the Internal Revenue Service (IRS) would continue even in the event of a shutdown of the government, and approximately one-third of its employees would be immune from furlough. On the other hand, as part of the contingency plan for the United States Treasury, around sixty thousand employees would be placed on furlough. The Internal Revenue Service Taxpayer Advocacy Service, which serves as a taxpayer advocate within the agency, might be included in this category.
Would the IRS be able to issue physical and digital tax refunds if the government shut down?
According to Spivey, electronic refunds should proceed as if there had been no shutdown if there are no mistakes. If the tax return has problems, it would be challenging to fix those problems during a shutdown because it could be practically impossible to reach the Internal Revenue Service (IRS) through phone calls at this time.
It is reasonable to anticipate that taxpayers who file their returns in hard copy will experience a delay in obtaining their refunds during a shutdown.
If you want to get your refund within 21 days, the Internal Revenue Service suggests filing your return electronically and setting up direct deposit. If you want to avoid any delays, we strongly suggest that you submit your application as soon as possible before the possibility of the government shutdown.
What is the potential length of time that a shutdown could delay tax refunds?
It is difficult to predict until it really takes place. Danny Werfel, the Commissioner of the Internal Revenue Service, stated to the media in January that “we have not experienced a shutdown in the middle of filing season, so there is still some uncertainty there.”
Since the pandemic shutdown in 2020, the Internal Revenue Service is still playing catch-up. “If we have another episode that delays the processing, it certainly compounds from the delays we were already seeing,” according to Spivey.
Should taxpayers be required to pay taxes on time even if the government shutdown lasts until April 15?
There is little doubt that the deadlines for reporting taxes will continue to be in effect even if the government is shut down. If the closure continues past the date of Tax Day, you are still obligated to make timely payments of your taxes. If you do not, you will be subject to penalties and late fees until you have completed payment.
