Shutdown Forces IRS to Consider Employee Furloughs

The Internal Revenue Service had expected to remain open for business despite a government shutdown but has now released a contingency plan showing that up to two-thirds of its 90,000 employees will be furloughed if the government halt starts Sunday.

The IRS had hoped to remain open and funded by the $80 billion boost through the Inflation Reduction Act, but has received late guidance from the Office of Management and Budget this week that it could not cover its workers’ salaries during the shutdown President Joe Biden’s legislation, reports The Washington Post.

According to OMB, the legislation money can’t be used to substitute for the IRS’s regular budget, which is used to pay most employees’ salaries. This means the backlogs will also return at the IRS, and that millions of tax refunds will not be issued to late tax filers unless they file electronically.

Further, there will be nobody working to process the payments owed by the government, and the thousands of employees who staff the agency’s phones to answer taxpayer questions, including the 6,000 newly hired customer service representatives, will not be working and taxpayer assistance centers will be closed.

“Taxpayers would be completely unable to contact most IRS employees during the shutdown,” according to Charles Rettig, the IRS commissioner during the Trump administration and the first years of the Biden administration.

He added that after the 34-day shutdown in late 2018 and early 2019, “it took the better part of a year for the IRS to get back,” even after it decided to get some employees back to work.

“Don’t overlook the impact on the employees or future recruitment effort,” Rettig said. “Current and prospective IRS employees have numerous options for employment in other organizations not similarly impacted by a dysfunctional Congress.”

The IRS had already been bracing for a higher number of delayed returns by the Oct. 16 late-filing deadline, after taxpayers in California had their deadline extended without penalty after the state’s weather events.

Meanwhile, if there is a shutdown, the IRS will not be responding to paper correspondents and 365 taxpayer assistance centers will close their doors, affecting some 5,000 taxpayers a day.

Treasury officials said that more than 10 million individual filers have gotten extensions through the Oct. 16 deadline, and IRS officials said the agency answers 46,000 daily.

The American Institute of CPAs is urging the IRS to rethink its furloughs and warned a shutdown will delay the processing of late returns, including a Nov. 15 deadline for tax-exempt organizations.

Meanwhile, long-term modernization projects funded through the Inflation Reduction Act can continue during a shutdown, according to federal officials, meaning the 30,000 employees can stay on the clock working on such projects.

The modernization work includes a Biden administration plan for government-backed digital tax filing software.