As the government shutdown dragged on, many people started to worry about tax season. With the early filing date approaching, will the IRS be ready to accept returns? And more important, will they be able to issue tax refunds?
According to the Wall Street Journal, the IRS is one of the agencies that loses its funding during a government shutdown. Only 12 percent of its employees will continue to work while the shutdown continues; that’s just a skeleton crew that keeps the agency technically open during a shutdown, but at a vastly reduced level.
With such a short staff, some of the IRS’ functions may be curtailed, meaning they may not be able to run audits or even answer taxpayer questions. That problem has raised fears that tax refunds will be delayed, even after the shutdown comes to an end.
During previous government shutdowns, that’s exactly what happened. In 2013, there was a shutdown that lasted for just 16 days. But, that brief shutdown resulted in delays for over $2.2 billion in tax refunds. For people who count on that money for financial relief, that’s a major problem.
But according to Russell Vought, acting director of the White House Office of Management and Budget, tax refunds will still go out as planned. He told reporters in a briefing at the White House that the administration is fixing an old problem that caused tax refunds to be delayed during previous shutdowns.
That’s a big relief to taxpayers who depend on their refunds to pay off debt or manage their bills. The average tax refund is nearly $3,000. For millions of people, receiving a refund is the largest financial windfall they’ll see all year.
The IRS will begin accepting tax returns, despite the shutdown, on Jan. 28.
The shutdown is just the latest complication for this tax season. The new tax act will also go into effect for the first time, changing how you do your taxes and what deductions you’re eligible to receive.
One of the biggest changes is the alteration to the standard deduction. Previously, it was $6,350 for single taxpayers and $12,700 for couples filing joint returns. Now, those numbers nearly double, reducing the number of people who will itemize their deductions.
Parents will also see the child tax credit increase from $1,000 to $2,000 per child. And there’s a new tax credit of $500 per adult dependent, which could help families reduce their tax bill.
With the shutdown and new tax system, it’s a good idea to start preparing for tax season now, so you can file your return early in the tax season and get your refund as soon as that process begins. Follow these steps to start getting ready:
- Review old returns: Look at the past two years of tax returns to jog your memory about what sources of income you had, what deductions you claimed, and any credits you may have qualified for in the past.
- Create a checklist: Make a list of all of the sources of income, deductions, and credits you may receive. As tax forms come in, such as W-2s, check them off the list. Having a paper document outlining what tax documents to expect will keep you on track.
- Gather documents: As tax documents come in, place them in a designated folder so you don’t lose track of them.
- Organize receipts: Make sure you have receipts for every deduction you intend to claim, either for your personal return or your business, if you have one. It’s a good idea to scan them in so you have an electronic record in addition to the hard copy.
While the government shutdown has significant implications for millions of people, as of right now, it looks like it won’t affect the timing of your tax refund. By taking the time to get organized now, you can file your tax return early, helping you get your much-anticipated tax refund as soon as possible.
