Americans may get their refunds during the shutdown, but the upcoming tax filing season is likely to be one of the rockiest in decades as the Internal Revenue Service grapples with a major tax overhaul with limited staff.
The agency is rushing to update its systems following the biggest change to the tax code in three decades -- while a government shutdown has kept seven in eight IRS employees away from work for the past 25 days. The 2017 tax overhaul affects virtually every tax return that will be filed after the season begins on Jan. 28.
For individuals, the overhaul changed the tax brackets, expanded the child tax credit and eliminated or limited several niche breaks. Pass-through businesses now can get a 20 percent deduction on some of their income, but have to follow complicated rules to figure out if they qualify. Multinationals also face complex regulations related to their offshore profits.
“The agency will try to doggedly deliver the filing season, but it’s going to be ugly in moments in ways we haven’t yet even anticipated,” said Robert Kerr, the executive vice president of the National Association of Enrolled Agents, a group that represents licensed tax preparers.
The IRS will have about 46,000 of its more than 80,000 employees at work in the coming days, according to an updated shutdown contingency plan the agency released Tuesday. This year’s start date is consistent with previous years’ filing seasons.
To prepare for the filing season, the agency will re-open call sites that had been closed during the shutdown. The IRS’s computers will still flag returns that raise red flags for more scrutiny, while non-automated audits will continue to be on pause.
But, with the agency operating at about 57 percent of staff and using newly updated systems and revised forms to accommodate all the law changes, hiccups are bound to occur, according to tax professionals. Here are some of the pitfalls to watch out for this tax filing season:
Minimal Customer Service
Slow customer service -- a problem the agency has struggled with in previous years -- is likely to be much worse this year, said Pete Sepp, the president of the National Taxpayers Union.
Individuals, small businesses and human resource departments haven’t been able to get their questions answered while the taxpayer assistance lines were closed, Sepp said. The call lines will re-open during the filing season, but taxpayers are likely to have more questions this year following the changes in the law, he said.