You, the Shutdown and Your Taxes

Ask tax professionals, and they’ll tell you that this year may be the most grueling tax season in memory.

1. The shutdown.The IRS is “on shaky ground after the 35-day shutdown that began in late December”, said former Internal Revenue Service Commissioner Mark Everson.
2. The Tax Cuts and Jobs Act of 2017. The new tax laws went into effect in 2019, and they’ve been a major contributor to this year’s tax difficulties. This law was hastily formulated and passed, with little thought to how the new rules would impact or merge with existing, longstanding laws.
3. System redesign. In addition to all the changes in deductions based on the new tax law, the overhaul also required a redesign of many of the IRS’ forms and systems. And it’s still reeling from several years’ worth of funding cuts that Republicans pushed through to punish the IRS for targeting conservative groups during the Obama administration.
4. Computer malfunctions. Computer issues have plagued the IRS as it tries to update systems built on 1950s-era technology. Improving security is critical to keeping our financial information secure.

Last year, the IRS extended the filing deadline by a day after its website crashed on what was supposed to be the filing deadline. I had a personal experience with the IRS’ computer problems when I received a friendly note informing me that I owed $3,000 from my 2017 taxes.

I freaked out and called my accountant. She explained that it was a computer problem that was occurring on a fairly routine basis. She prepared a letter for me to submit to the IRS, and that settled the matter. But it’s unsettling. No one wants to be receiving hate mail from the IRS.

Tax filing season officially starts on January 28

According to the IRS, taxpayers should expect to get their refunds back on time. But the nation’s longest shutdown ended just days before the official start of the tax season. In the final days of the impasse, with neither side budging, the IRS called tens of thousands of employees back to work.

Those forced back to work without pay sued the federal government

More than half of those workers didn’t show up for work. They, along with thousands of other federal employees, worked without pay throughout the shutdown–pawns in a game of political ping-pong. The National Treasury Employees Union, which represents IRS workers, sued the federal government during the standoff, saying it was unconstitutional for the agency to require so many employees to work without pay.

Longer-term implications of the shutdown

About 25 information technology staff members a week quit during the shutdown, and another two dozen IT workers retired during that period.The shutdown made it difficult for the agency to recruit and hire seasonal staff.Those who rely on IRS help are often low-income taxpayers who depend on refunds to pay for major expenses, such as health care. According to Caroline Bruckner, managing director at the American University’s Kogod Tax Policy Center, there are “serious consequences” if the refunds are delayed or smaller than anticipated.

One CPA’s prediction: Filing an unpreceded number of extensions

Ironically, tax preparers had been concerned about this tax season because of the many changes associated with the Tax Cuts and Jobs Act. Add in the shutdown, with IRS workers forced to show up for work without pay, and tax professionals knew they were in for a difficult season. According to one longtime San Francisco CPA, “I suspect I’m going to be filing an unprecedented number of extensions.”

The IRS recommends filing electronically to minimize errors and receive your refund faster

Just as paying taxes online can be faster and easier, so is creating your Living Trust. Many of our clients begin the intake process before even visiting our office, and we’re available by phone and email for questions. For those who live outside the Bay Area, we can also work remotely. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.