The IRS has released its Lapsed Appropriations Contingency Plan for fiscal year 2019, which details necessary adjustments of excepted positions and personnel during the current government shutdown. According to the plan, 46,052 of the IRS’s 80,265 employees (57.4% of the workforce) will be called back to work without pay (except for 809 employees who will be compensated by other than annual appropriations). Activities directed at implementing the Tax Cuts and Jobs Act are not affected by the lapse in appropriations because the bill provided funding through 9/30/19. Details on the Plan are included below.
The Plan is intended to enable the IRS to continue return-processing activities “to the extent necessary to protect Government property” (including tax revenue) and to “maintain the integrity of the federal tax collection process,” along with certain other authorized activities. For a shutdown during tax filing season, the Plan notes, the IRS must excuse additional positions beyond those excepted for the non-filing season.
In general, under the Plan, many automated and electronic operations will be functional. While telephone customer service has not been available, it will be made available for filing season, (but taxpayers should anticipate longer wait times). In-person service and appointments are generally not available. In addition, the IRS will not be conducting audits, nor will it be processing applications or determinations for tax-exempt groups.
Tax Cuts and Jobs Act implementation
The Plan states that activities related to implementation of the Tax Cuts and Jobs Act (TCJA) are excluded. TCJA implementation includes creating or revising worksheets, tax forms, form instructions and publications, as well as making changes to IRS policies and procedures.
The Plan explains that, in enacting the TCJA, Congress provided the Treasury Department with funds that will remain available until September 30, 2019. As a result, some implementation activities will not be affected by a lapse in appropriations in the fiscal year 2019. Additional activities may continue to protect incoming tax revenues during the upcoming filing season.
Payment of refunds
The Plan states that tax refunds are paid from a permanent, indefinite refund appropriation (31 U.S.C. Section 1324) and, accordingly, activities necessary to issue the refunds may continue during a shutdown. This includes the following activities:
- Processing electronic returns through issuance of refunds
- Processing paper refund tax returns through issuance of refunds
- Processing 1040X amended refund returns adjustments
- Processing Department of Defense claims for refunds
- Manual refund support
- Document preparation, screening and control of work in Image Control Team
Other excepted activities (activities that IRS will perform during shutdown)
Additional excepted activities include:
- US certification residency program to issue Form 6166 to taxpayers
- Income Verification Express Service (IVES) and Revenue & Income Verification Service (RAIVS) photocopy programs
- Maintaining minimum staff necessary to handle budget matters related to the lapse in appropriations
- Services performed by the IRS that are necessary to the Social Security Administration’s carrying out certain functions that would continue despite a lapse in appropriations
In addition to disaster-relief activities authorized in the event of an emergency or disaster, further excepted activities include:
- Completion and testing of the upcoming filing year programs
- Processing remittances
- Processing disaster relief transcripts
- Responding to taxpayer filing season questions (call sites)
- Continuing the IRS’s computer operations to prevent the loss of data
- Protection of statute expiration, bankruptcy, liens and seizure cases
- Upcoming tax year forms design and printing
- Protecting federal lands, buildings and other property
- Maintaining minimal building facilities personnel for safe conditions
- Maintaining minimum staff necessary to perform accounting functions
- Administering contracts related to safety of human life or protection of government property
- Maintaining criminal law enforcement and undercover operations
Non-excepted activities, for which associated employees will be furloughed, include:
- Processing non-disaster relief transcripts
- Most headquarters and administrative functions not related to the safety of life and protection of property
- All audit functions, examination of returns, and processing of non-electronic tax returns that do not include remittances
- Non-automated collections
- Legal counsel
- Taxpayer services such as responding to taxpayer questions (call sites) (during non-filing season)
- Information systems functions (except as necessary to prevent loss of data in process and revenue collections)
- Planning, research, and training and development activities (except as necessary to perform excepted or exempt activities)
It is welcome news that the IRS will process returns requesting refunds (for both individuals and corporations) in the normal course during this filing season.
Taxpayers should be aware, however, that many IRS services will remain unavailable during the shutdown. For example, the IRS will not be answering calls unrelated to return preparation, will not be available for appointments (including examinations, collection, Appeals, or Taxpayer Advocate cases), and generally will not be responding to taxpayer correspondence. IRS Chief Counsel’s Office also will not be working on private letter rulings or change of accounting method requests.
While the IRS will not be conducting audits, automated initial contact letters will continue to be mailed. Taxpayers with information document requests (IDRs) due during the shutdown period should generally still respond timely, with the understanding that such responses will not be reviewed for the time-being. However, the IRS continues to monitor cases for potential statute of limitation expiration and may contact taxpayers to seek extensions.
While collection activity will generally not occur, automated collection activity will continue. For example, automated IRS collection notices will continue to be mailed. Taxpayers receiving any IRS correspondence, including balance due notices, should respond timely by certified mail and follow up once the IRS reopens.
Additionally, taxpayers remain unable to obtain employer identification numbers (EIN) for foreign entities. Taxpayers that are unable to secure an EIN within the 75-day threshold for a timely entity classification election on Form 8832 should be able to take advantage of late election relief in Revenue Procedure 2009-41.
Finally, it is important to know that once the government reopens, the IRS will likely have a significant backlog and will likely be delayed in responding to correspondence, answering phones and providing taxpayer services.
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Brandon Caroprese, CPA, MST