Calls will go unanswered and mail will get no response under the IRS contingency plan for the first five days of a federal government shutdown. The plan, released Thursday, calls for furloughs of two-thirds of IRS staff if the government shuts down, resulting in “significant harmful impacts” on millions of taxpayers, Treasury said.
The fiscal 2024 Lapsed Appropriations Contingency Plan will go into effect when the IRS is notified that government appropriations have lapsed and that a shutdown is to be initiated. All furloughed IRS employees will be able to return to work, and the Service will resume normal operations, when funds are appropriated. To avoid a shutdown, Congress must approve a budget for fiscal 2024 or a continuing resolution that keeps the government operating temporarily by Saturday, Sept. 30.
If a government shutdown lasts for more than five business days, the IRS human capital officer will coordinate a Service-wide reassessment of the excepted activities.
With the Oct. 16 deadline looming for some 10.5 million individual tax returns on extension, here is a look at IRS operations that would stop and those that would continue under the plan.
Which operations will stop?
The IRS says it will stop all taxpayer services, including answering phone calls. The IRS says it normally answers about 46,000 phone calls per day. The 363 Taxpayer Assistance Centers (TACs) across the country will also close. During the month of October, TACs provide face-to-face service to about 5,000 taxpayers per day.
Refund processing will stop except in cases of e-filed, error-free returns where the refunds can be direct-deposited automatically.
In addition, the IRS will not respond to paper correspondence (although it will still be able to receive mail deliveries during the shutdown and will process remittances). Taxpayers who send mail to the IRS during this period should expect a longer response delay after the IRS reopens because the correspondence backlog will grow, Treasury said.
All audits and examinations will be put on hold.
Which operations will continue?
IRS activities that were funded with resources provided in the Inflation Reduction Act, P.L. 117-196, can continue during a government shutdown because they are not dependent on fiscal 2024 appropriations. Other operations are excepted for various reasons, including activities necessary to safeguard human life or protect government property, Treasury said.
Under the contingency plan, the IRS will continue preparations for the upcoming filing season, such as updating tax forms and IT systems, hiring and training. The Service will also continue limited modernization initiative efforts funded specifically by the Inflation Reduction Act.
The IRS will process requests for transcripts following disasters and will provide income verification to mortgage lenders, banks, and others who request this information through the Income Verification Express Service program.
Critical IT system functions that are necessary to protect taxpayer data will continue.
Other work that will continue includes implementation of the green energy credit provisions of the Inflation Reduction Act and the direct file pilot program, the plan said.
Earlier on Thursday, the AICPA urged the IRS to announce its contingency plan for a government shutdown as soon as possible and to base that plan on broader interpretation of staff furloughs than has been used in the past.
In a letter to Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel, the AICPA said the Service should interpret guidance from the Office of Management and Budget “to include not only the government’s safety of human life and protection of property but also for the taxpayer, thereby excepting IRS employees.”
“We hope that, in the event of an October 2023 government shutdown, the government is able to retain more essential IRS employees during the extended and upcoming filing season than occurred in prior government shutdowns,” said the AICPA letter, which was signed by Blake Vickers, CPA, CGMA, chair of the AICPA Tax Executive Committee.