The IRS is facing a tax season amid shutdown with new rules that could complicate filing for millions of Americans – and a potential shortage of workers to handle returns – raising the possibility of delaying refunds and angry taxpayers. ] As it prepares to accept 2018 filings starting Monday, the administration has recalled ten of thousands of IRS employees, but there are already signs that some will be no-shows because they are facing the prospect of working without pay. some are taking advantage of rules allowing them to stay home i
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The public, meanwhile, will be filing for the first time under Republicans' sweeping tax overhaul, H.R. 1, and many will surely be confused by changes made as part of the largest tax code rewrite in a generation. At the same time, even experts are unsure whether the workers have had the correct amount of taxes withheld from their paychecks, which could mean that many people who are accustomed to receiving refunds may instead owe the IRS
"The politicians are playing with dynamite if something goes wrong during the filing season, "said former IRS Commissioner Larry Gibbs, who served during the Reagan administration. "
"You have extraordinarily angry and very upset taxpayers."
It is shaping up to be a big test of Trump administration and is an increasingly important pressure point in the fight over the ongoing partial government shutdown
"Everybody is concerned," said John Koskinen, who stepped down in 2017 as IRS Commissioner. "
Filing returns is the most direct way for millions of Americans to interact with the federal government. Every year, the IRS typically collects more than 150 million returns. Lawmakers have long been reluctant to mess with people's refunds for fear of riling a vast swath of middle-class voters.
So far, however, lawmakers can not even agree on holding a congressional hearing looking into potential problems with this year's filing season. House Democrats abruptly canceled a hearing scheduled for Thursday after Treasury Secretary Steven Mnuchin declined to testify. The administration offered to send lower-level officials, which Democrats rejected.
It has recalled more than 30,000 furloughed IRS employees, and announced it is easing penalties for people who have underpaid their taxes last year. An obscure rule requires people to pay at least 90 percent of their taxes during the calendar year. Most people do not know about the rule and normally do not worry about it, because their retention ensures they clear that threshold. But, amid pressure from lawmakers, the IRS announced it is easing that standard to 85 percent.
And last week, with an eye on the Jan. The Treasury Department has rushed out hundreds of pages of regulations detailing how a new deduction for unincorporated businesses will work.
There are already indications, however, that the IRS's employee recalls designed to mitigate the effects of shutdown are not going as planned.
Some IRS workers are staying home because, without a paycheck, they can not afford things like paying someone to watch their children while they work.
"After a month with no pay, real hardship exists for federal employees, including not having the money needed to get back and forth to work or to pay for the child care needed to return to work," said Tony Reardon, head of the National Treasury Employees Union
Even if everyone did show up for work, the IRS says it will still have 57 percent of its workforce at its busiest time of year, which some say is already inadequate .
"I do not think the machinery can run effectively at half staff," said Christy Master, a former congressional tax aide who founded a financial consulting firm. "It takes a lot of people and a lot of manpower to process everything."
Taxpayers will be confronting – many for the first time – a welter of changes made by the Tax Cuts and Jobs Act.
Gone has familiar features like personal exemption. And though they may not realize it yet, millions will no longer claim breaks for their mortgage interest and charitable contributions, thanks to a newly enlarged standard deduction designed to simplify filing.
People without health insurance can be surprised to learn they are still on the hook when it comes to Obamacare's so-called individual mandate. Republicans have been forced to pay the penalty for failing to have coverage one more time, but they have delayed the repeal for one year. The penalty is $ 695 per person or 2.5 percent of income, whichever is larger.
There is also considerable uncertainty about what will happen with refunds.
About three-quarters of Americans typically get refunds which last year averaged almost $ 3,000. For many, it is the single largest payment they receive all year. But the tax overhaul upended the formula for figuring out how much to withhold from people's paychecks when lawmakers junked personal exemptions.
The Treasury Department last year rolled out new "forholding tables" designed to compensate for all the changes, but even experts did not agree if the agency got it right.
The IRS has been urging taxpayers for months to double check how much is being taken from their paychecks, posting a forholding calculator on their Web site. But an IRS advisory board said in October that few were bothering. "Usage of the 'calculator' through completion has been minimal due to its complexity," said the IRS's Information Reporting Program Advisory Commission.
To underscore the uncertainty, even as some warn refunds will be way down this year, others predict they will actually be way up. Morgan Stanley says it believes Treasury has forfeited too much from people's paychecks, and that agency will pay out 26 percent more in refunds than it did last year.
On top of all that, some lawmakers still want to fiddle with the tax code. They want to retroactively revive a batch of tax breaks that expired at the end of 2017 so people can claim them now when they file their returns. But because of the shutdown, it seems more likely that Congress will not be able to move legislation until after the filing season, which could force some to file amended returns.
"This was always going to be a difficult filing season because of the changes in the new law, and that's just making it worse," said Mark Everson, a former IRS commissioner who is now vice chairman of alliantgroup. "You can not help but be concerned."