Yes, You'll Get Your Thousands in Tax Refunds Even During the Shutdown — but the Money May Be Delayed
As the federal shutdown continues without a clear end, one source of uncertainty was relieved when White House officials announced on Monday that the Internal Revenue Service would still issue tax refunds.
But the decision to bring back non-essential workers may not prevent delays in processing the extra cash as unpaid staffers could call in sick rather than show up for work, experts say.
“Tax refunds will go out,” Russell T. Vought, acting director of the White House Office of Management and Budget, told reporters on Monday, according to the New York Times.
“We have tried to make this as painless as possible consistent with the law,” Vought said, the Washington Post reports.
Treasury Secretary Steven Mnuchin explained that when tax-filing season begins in late January, enough IRS staffers will be on hand for 60 to 70 percent of incoming calls from taxpayers who need assistance, the paper reports.
But in previous shutdowns, the IRS said it wasn’t allowed to send out refunds as it did not have funds for those staffers. According to its own guidelines for operations under a shutdown, the IRS had classified processing refunds as non-essential work, along with “non-automated collections,” auditing and other functions.
The legality of the White House’s reversal in policy to send workers back to issue refunds — seen as an effort to head off a widespread and unpopular effect of the grinding shutdown — is being questioned by lawyers for the House Ways and Means Committee in Congress, the Times reports.
(Representatives with Treasury and the IRS did not respond to PEOPLE on Tuesday.)
“They’re reversing a long-standing legal position,” Howard Gleckman, senior fellow and tax expert at the Urban Institute, told the Associated Press.
Even so, he said, “Who’s going to sue? It would be hard to show damages. … So they might be able to get away with it.”
“The refunds themselves are not subject to appropriation, meaning the IRS and the Treasury Department have the authority to pay the refunds regardless [of the shutdown ending],” Nicole Kaeding, the director of federal projects at the Tax Foundation, tells PEOPLE.
“The question,” she continues, ” Was: ‘Did they have the authority to have employees there to process the refunds? Were those workers essential and could they be working during a government shutdown?’ That’s what was reversed yesterday.”
There is another problem: The furloughed workers brought in to help with refunds won’t be paid until the shutdown ends, at some undetermined point in the future. (President Donald Trump, who instigated the shutdown over his insistence for a border wall with Mexico, has said it may last months or years.)
Kaeding says that even though furloughed workers will be brought in, they may call in sick to avoid working without pay. This has happened with other government workers, like those employed by the TSA.
Understaffing could slow the processing of refunds, Kaeding explains, imagining this hypothetical: “They say they need 1,000 people to process the refunds. Well, if 600 of them call in sick, that presumably would slow things down.”
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Adding to the pressure, the implementation of the federal Tax Cuts and Jobs Act already promised significant changes to the country’s tax code. Not only will many filers have questions about this new process, the IRS itself has undergone an “internal overhaul” to be best prepared, Kaeding says.
“That’s a challenge for the IRS even without the government shutdown,” she says. “The shutdown just adds another layer of complexity.”
Already the second-longest shutdown in U.S. history, the current funding freeze is rolling into exactly the period when Americans who most need their tax refunds are filing for them, according to Kaeding.
About 75 percent of Americans receive refunds, the AP reports. Average tax refunds in recent years reportedly average several thousand dollars.
In the 2016 fiscal year, the average individual refund was $3,050, according to CNBC,
“The individuals that tend to file early tend to be lower-income individuals and they tend to be people who are getting refunds,” Kaeding says. “Individuals that owe money or people who have very complicated taxes, which tend to be the higher-income individuals, tend to file closer to March or April.”
For last year’s filing, by Feb. 16, 2018, $103 billion had already been refunded to 33 million Americans, she says.
When filing begins this year on Jan. 28, “The IRS will likely see a number of people filing very quickly and those tend to be the individuals getting refunds,” she says.
If the shutdown continues into the tax-filing season, she advises people to “be more patient” as they wait for their money.
“If the government reopens Friday, that’s a very different outcome than if the government doesn’t reopen until February, for instance.” Should the shutdown persist not just weeks but months, Kaeding says, “That could start to have some real impact.”