Will the Government Shutdown Impact Your Tax Filings?
The current federal government shutdown could not have come at a worse time for the IRS with the start of tax season right around the corner. Reports have indicated that only 12% of IRS employees are considered to be “essential” and are still working, without pay, through the shutdown.
Filing 2018 Tax Returns
The IRS officially began accepting business tax returns for processing Tuesday though it will likely be another week before many tax software providers begin processing e-filings. The IRS has announced it will open electronic filing for individual returns on January 28th this year and that date is not expected to be delayed.
On Monday, the acting director of the White House Office of Management and Budget announced that personal tax refunds will be released even if the government remains shutdown, a measure not taken during prior closures. Many commentators have indicated that this removes some of the political pressure on the administration and could lengthen the shutdown, but as many early filers receive refunds as well as earned income tax credits the surprise announcement came as welcome relief.
Forms and Instructions Needed
Though the IRS has begun accepting business returns, most corporations will not be able to file for some time. The final versions of some forms have not been released. Instructions for 2018 are also pending for many forms including the Form 1120 and 1120S.
It is not clear how the shutdown will impact these release dates, but it is possible there will be delays.
Many states are also still updating their tax guidance in response to the 2018 federal tax law changes so delays at the federal level could trickle down to the states in some cases.
Tax Reform Guidance Needed
The Tax Cuts and Jobs Act (“TCJA”) passed last December created a huge additional burden for the IRS, because of the volume of tax law changes it contained. Though some IRS employees that are assigned to the implementation of the TCJA have been spared from the shutdown as a result of designated government funding, the final guidance we were hoping to receive before finalizing 2018 returns may not be available in time.
In particular, the final guidance on the Section 199A deduction, which impacts S Corporation banks and their shareholders is not anticipated until the third week in February, at the earliest.
Communicating with the IRS during the Shutdown
Communications with the IRS are currently very limited and most correspondence will need to be submitted by mail. IRS hotlines, including the Practitioner’s Priority Service, are shut down. Faxing the IRS is also not an option. The Tax Court is closed and examinations have been put on hold for the duration.
Next Steps
Though we certainly can’t control the government shutdown or predict what Congress may do, CLA is actively helping clients prepare for the 2019 tax season while we wait for the IRS to re-open. We are here to help you do the same. Please contact us. ܱ
Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.
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