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IRS will issue refunds and tax reform guidance during shutdown

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Tax Hot Topics newsletter The IRS has announced that it will continue to process tax returns, issue refunds, and advance tax reform guidance during the partial government shutdown.

Funding for several government programs and agencies, including the IRS and Treasury, expired on Dec. 22. Democrats and Republicans have so far been unable to agree on an extension. The Antideficiency Act largely bars agencies from spending money beyond what Congress has appropriated, and agencies subject to the shutdown can generally only perform activities that are:

  • Required by law and supported by funding that does not require annual appropriations
  • Necessary to safeguard human life or protect government property
  • Necessary for an orderly shutdown

The IRS has long claimed the authority to continue to accept and process returns in order to safeguard tax payments, but the Office and Management and Budget (OMB) had previously ruled that the IRS did not have the authority to actually issue refunds. However, OMB recently reversed itself, and the IRS announced that it will issue refunds once the filing season begins on Jan. 28, even if the government shutdown is not resolved.

The IRS also has a separate two-year grant of funding for implementing the Tax Cuts and Jobs Act, and OMB has concluded that the Office of Information and Regulatory Affairs, which reviews IRS regulations, can work during the shutdown. So the IRS can ostensibly continue to issue tax reform guidance during the shutdown, but the process is expected to slow. The IRS recently cancelled a regulatory hearing on the proposed regulations for Opportunity Zones, for example.

In addition, the IRS is suspending all exam and appeals activity until a funding agreement is reached, and taxpayers will not be able to receive taxpayer assistance except for disaster relief issues.

Contact:

Dustin Stamper
Managing Director, Washington National Tax Office
T +1 202 861 4144

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