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Government shutdown: What you really don't want to see during busy season

Government shutdown

The primary function of the government is - and here I am quoting directly from the U.S. Constitution - 'to spew out paper.'

-Dave Barry

Humorist Dave Barry can be quite silly, but it’s not so funny when faced with a government shutdown like the one that took place October 1-17, 2013. That was the last one before the shutdown that took place Friday at midnight. In 2013, government operations resumed after a continuing resolution, or CR, was signed into law.  And sometimes, well, we just “need that paper.”

Since accountants like to talk numbers, the 2013 16-day shutdown was the third-longest government shutdown in U.S. history. It trails behind an 18-day shutdown in 1978 and a 21-day shutdown 1995-96.

Monday, Congress voted to approve a temporary funding bill – the fourth since September – effectively reopening the government. But it’s a stopgap measure. And it’s possible we’ll see another shutdown on February 8. This is a critical time for CPAs who’ll be in the midst of filing season.

How did we get here? In September, Congress was unable to agree on a long-term spending bill for fiscal year 2018, so they passed a two-month CR to fund the government from October 1 to December 8. Because Congress was in the throes of tax reform, they passed a second CR to December 21, providing an additional two weeks of government funding. Unfortunately, this additional time didn’t allow for a spending agreement.

On January 19, 2018, a third CR expired. Despite promising signs of a deal, negotiations over a long-term spending and another short-term CR fell apart over immigration policy. Three days later, Congress approved a spending measure that will fund the government until February 8.

What does this all mean? From a macro perspective, should another shutdown occur, approximately 800,000 federal employees would be indefinitely furloughed, including approximately 46,000 IRS employees. Another 1.3 million would be required to report to work without knowing when they’d be paid. None of those workers would be paid during the shutdown. However, Congress has voted to pay federal employees retroactively for every previous shutdown.

Enough of the big picture. It’s almost the busy part of busy season, and CPAs want to know how another shutdown would affect their jobs. Should another government shutdown occur in February, we know from the experience of the last three days that many non-essential IRS functions would shut down, including all taxpayer services and examinations. The closure of taxpayer and practitioner hotlines could be particularly challenging if the shutdown becomes protracted, and you need to contact the IRS. This timing has the potential to be much more problematic than the January shutdown.

Another concern with a shutdown is the IRS’s ability to develop much-needed guidance related to tax reform. Already constrained for resources to leverage the guidance process, a shutdown certainly wouldn’t help. To help keep you up to date in this area, the AICPA has a Tax Reform Resource Center that is an excellent source for all things tax reform. 

While the Office of Management and Budget (OMB) is the official source of information regarding the impact of shutdowns, the Treasury Department released a “Lapsed Appropriations Contingency Plan (Filing Season)” as a key resource prior to the most recent shutdown. Also, the AICPA Tax Section will post information to help practitioners with related challenges in filing returns and representing clients (e.g., collections, notices, ongoing examinations, etc.).

According to the IRS’s last contingency plan, the following activities would cease in the event of another shutdown:

  • Service center processing after the point of batching (e.g. Code & Edit, data transcription, error resolution, un-postables)
  • Issuing refunds
  • Processing Non-Disaster Relief transcripts, Income Verification Express Service/Return and Income Verification Services
  • Processing 1040X Amended Returns
  • 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

The plan authorizes several critical IRS functions to continue, however. This includes:

  • Completion and testing of the upcoming filing year programs
  • Electronic returns that are processed systemically (requiring no intervention by service center functions) up to the point of refunds
  • Processing paper tax returns through batching
  • Processing remittances including payment perfection
  • Processing disaster relief transcripts.

Let’s hope we don’t see another shutdown in February. And if the government does shutdown again, that it has minimal impact on busy season. 

Dave Barry also said “[w]hen trouble arises and things look bad, there is always one individual who perceives a solution and is willing to take command. Very often, that individual is crazy.”  As hard as it seems sometimes, those who represent us in Washington are trying to do the right thing for their constituents and the country. 

Edward Karl, CPA, CGMA, Vice President --Taxation, Association of International Certified Professional Accountants

Government shutdown courtesy of Shutterstock.

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