While the government shutdown continues, the IRS recalled about 36,000 workers who were on furlough on Jan. 15 to handle tax refunds. The move was largely seen as an attempt by the Trump administration to ensure that tax refunds are received on time after initially sparking a backlash.
But with the IRS starting to process returns as of Monday, the administration’s move might not be enough if the shutdown drags on.
Government shutdown risks tax season being messy
When the shutdown began, 90% of IRS workers were furloughed and tax refunds were initially stalled because there weren’t any workers available to process them. About 46,000 out of the IRS’s 80,000 employees were recalled back to work. However, hundreds of these employees are receiving permission to skip work because they are not being paid and will not be paid until the shutdown ends.
“The move is the leading edge of pushback from within the IRS, and it signals the potential for civil servants to take actions that could slow or cripple government functions as the shutdown’s political stalemate continues in Washington,” the Washington Post reported.
Some employees are using a provision in their union contract “that allows them to miss work if they suffer a ‘hardship’ during a shutdown,” such as an empty gas tank or child-care bill. “That is why the exemption exists,” NTEU National President Tony Reardon stated to USA TODAY. “The longer employees go without pay, more face financial hardships.”
Marissa Scott, an IRS customer service representative currently on hardship leave, told the Post that she usually helps up to 50 people a day during tax return season and predicted to the Post that the shortage of IRS workers means that tax season “is going to be a disaster all around.”
Editor’s note: USA Today provided tips for Americans to mitigate IRS chaos this tax season.
This tax season ‘more complicated than usual’ — even before shutdown
With fewer employees reporting for work, this could lead to a delay in tax refunds being processed. If that were to happen, Credit Suisse analysts noted that this could “cause a sharp decline” in retail sales and consumer spending in February.
“For reference, a one-week delay in refunds would hold up roughly $15 billion in cash flows, which is equivalent to around 3.0% of retail sales or 1.3% of total monthly consumer spending,” the note stated.
Generally, tax refunds ramp up as February approaches and reach a total of approximately $70 billion by the end of the month. By March, that number usually rises to about $130 billion.
Credit Suisse analysts stated that this year’s refund process will “be more complicated than usual, since this is the first year of returns subject to the extensive tax changes passed in late 2017.” And all of this will be made harder with a shortage of IRS employees.
Adriana is an associate editor for Yahoo Finance. Follow her on Twitter @adrianambells.
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