The Office of Management and Budget (an office of the White House) has reversed its 2011 directive for the Treasury Department to withhold refunds during a government shutdown. At the prospect of a lengthy shutdown, the IRS requested a review of that decision and has been granted authority to process and issue refunds as usual.
The IRS’s Lapse in Appropriations Contingency Plan released in November outlined that refunds could not be issued during a shutdown and would be held until the government reopened. Tax refunds are paid through a permanent and indefinite appropriation enacted by Congress, but in 2011 the OMB interpreted the law and directed the IRS to not pay refunds during an appropriations lapse. They have reviewed the relevant portions of the law again at the request of the Treasury Department, and it was announced yesterday that refunds will be issued, and that tax season will begin on time.
This is good news for taxpayers who file early. The Wall Street Journal reported that last year between the opening of tax filing and February 2nd, the IRS had already paid $12.6 billion in refunds to more than 6 million households. A hold on refunds would have been an economic strain to many households, in addition to the hundreds of thousands of furloughed employees already lacking their paychecks. Millions of taxpayers, particularly low-income taxpayers who benefit from refundable credits, rely on their refund every year to meet their budgets or pay off debts. Retailers and creditors would have also felt the hit without the usual influx of tax refund spending. The new directive will ensure that refunds begin to go out on schedule. It’s unknown currently whether to expect delays due to backlogs or a shortage of staff.
Watch our Facebook page for updates as we approach the start of the 2018 tax season.