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Jan. 5, 2019 / 7:58 PM GMT/ Source: CNBC.com
By Darla Mercado, CNBC
As the partial shutdown of the federal government passes the two-week mark, a new worry has emerged: the possibility that some tax refunds may be delayed.
Congress and President Donald Trump have been in a standoff over funding for a border wall, while about 800,000 federal employees are furloughed or working without pay.
The House, now led by Democrats, passed legislation Thursday night to end the shutdown; the president, however, could still veto it even if the Senate acts to approve it.
Right now, about 12 percent of IRS staff are expected to continue working through a shutdown, according to the agency’s plan, which means certain functions such as answering taxpayer questions would be curtailed. The IRS is still working on contingencies if the shutdown continues.
That makes this a stressful time for accountants — and their clients. “The October 2013 shutdown caused a lot of angst for practitioners,” said Edward Karl, vice president of taxation for the American Institute of CPAs.
That shutdown took place from Oct. 1 to Oct. 17 — right in the heart of the 2013 tax extension filing season.
“If there were some issue and you needed to contact the IRS, you couldn’t get them,” Karl said. “There were many folks concerned about that.”
Here’s what you need to know about the shutdown’s potential impact on your taxes.
A spokesman for the IRS would not speculate on how long the shutdown would have to last in order to result in a delay of refunds.
However, millions of taxpayers tend to be early birds and submit their returns as soon as they can. Households might need the refunds to help pay off remaining holiday debt or just to bolster their savings.
Last year, the IRS kicked off the filing season on Jan. 29.
By the end of that week — Feb. 2 — the taxman received 18.3 million returns and processed 6.1 million refunds, with an average refund of $2,035.
Last year, the IRS kicked off the filing season on Jan. 29.Jonathan Ernst / Reuters file
In all, the IRS received 154.4 million returns by Nov. 23 of last year, the most recent date available, and issued an average refund of $2,899.
Providers of tax prep services say they are ready to receive early bird returns.
“Filers can prepare their tax returns now and beginning Jan. 4, TurboTax will securely store completed returns for transmission to the IRS and states once they begin accepting e-file,” TurboTax said in a statement.
The company, along with others, also offers refund advances – short-term loans that you can receive within days of the IRS accepting your return. You would then use your tax refund proceeds to pay off the loan.
A shutdown at this point of the year could have an even greater impact on taxpayers because they’re about to file for the first time under the new Tax Cuts and Jobs Act.
The new tax code took effect a year ago.
In 2018, it nearly doubled the standard deduction to $12,000 for singles and $24,000 for married couples filing jointly. The law also curbed a slate of itemized deductions, and placed a $10,000 limit on the amount of state and local taxes filers can deduct.
In addition, taxpayers are also dealing with new forms. Your Form 1040 now will be “postcard sized,” but you’ll still need to work through pages of schedules to calculate other tax breaks.
“Sometimes you have to call the IRS and the waits are long even at good times,” said Jeffrey Levine, CPA and director of financial planning at BluePrint Wealth Alliance in Garden City, New York.
“You compound it with a situation where you have a new law and more questions than in years past,” he said.
Wait and see
Taxpayers tend to receive many of the forms they need to file, including the breakdown of their earnings on Form W-2 and their Form 1099s for other types of income, in January.
The IRS hasn’t yet announced when it would begin receiving 2018 tax returns, so filers should start pulling their documents together now so that they can submit as soon as the IRS is ready.
This is all the more important for individuals with complex returns and detailed questions on the new tax law and how it applies.
“We want you to get things in as early as possible because we know it’s going to be a disaster show,” said Levine.
While taxpayers face the prospect of having refunds delayed in the event of an extended shutdown, filing as early as you can allows you to head off fraudulent returns filed by scammers who stake your claim on any potential refund, Levine said.
That’s because the IRS will reject a return if it has already received a Form 1040 with the same information.
“Prepare your information as early as you can and get it to your practitioner as soon as possible,” Karl said.
Darla Mercado, CNBC
Visit the Source: https://www.nbcnews.com/business/taxes/federal-shutdown-means-tax-refunds-may-be-delayed-n955106?cid=public-rss_20190105