How the Government Shutdown Affects Tax Returns — and Your 2019 Tax Refund

Tax season 2019 officially starts on January 28, which is when the IRS is set to begin processing tax returns.

But discussions between President Trump and Congress to fully reopen the government have hit a wall, so to speak, and many anticipate that the partial federal government shutdown will still be in effect when tax season begins.

Assuming the government funding issues aren't resolved, how will the shutdown affect tax returns, if at all? An even more pressing question for taxpayers may be: How will the shutdown affect my tax refund?

Many taxpayers rely on receiving a sizable refund — the average tax refund was roughly $3,100 last year. So there's good reason why people want to know when tax refunds will be paid in 2019, and if they'll be delayed because of the government shutdown.

Here's what we know about how the shutdown is affecting the 2019 tax season.

When Can I File Tax Returns?

The IRS is open during the shutdown, even though most employees are not getting paid. In fact, the agency has said that the shutdown will not affect when tax-filing season begins. The IRS announced in early January that, regardless of the government shutdown, the agency will begin processing tax returns on its normal schedule — starting on January 28, 2019.

That's not the date when taxes are due in 2019, mind you. January 28 is simply the day that the IRS will begin processing tax returns. (In nearly all of the country, the last day to file taxes in 2019 is April 15, like usual.)

Also, bear in mind that you can file taxes via TurboTax, H&R Block, or other services before the IRS actually starts processing returns. "Software companies and tax professionals will be accepting and preparing tax returns before Jan. 28 and then will submit the returns when the IRS systems open," the IRS stated.

However, if you want to file taxes for free in 2019 using the IRS Free File option, you'll have to wait until January 28. That's when the IRS's Free File Software will be available to taxpayers this year.

Will the Government Shutdown Affect Tax Refunds in 2019?

There has been plenty of confusion about how the shutdown affects tax refunds — if indeed refunds will be impacted at all.

At the start of 2019, the Wall Street Journal wrote that the shutdown "would likely delay billions of dollars in income-tax refunds," because only a tiny percentage of IRS employees would be available to handle the onslaught of paperwork during tax season.

This wasn't surprising: During the 2013 government shutdown, when 90% of IRS workers were furloughed, some $2.2 billion in tax refund payments was delayed.

However, the Trump administration has since said that tax refunds would be paid even if the shutdown continues past the start of tax season. The IRS will "provide refunds to taxpayers as scheduled," regardless of the shutdown, an agency press release stated.

How will the IRS pay tax refunds even though its funding has lapsed and most employees have been furloughed? When the shutdown began, many IRS employees were furloughed alongside hundreds of thousands of other federal workers, who haven't been getting paid. But in mid-January, the IRS called 46,000 employees back to work to help handle the start of the 2019 tax season.

While these IRS employees have been called back to work, they are still not getting paid. And, as the Washington Post reported this week, many IRS workers will be staying home even though they've been told to report to the office, either because they can't afford childcare, transportation, or other expenses related to their jobs, or because they are protesting that they aren't getting paychecks during the shutdown.

How a high rate of absence among IRS workers affects tax season in 2019 is unclear, but employees and union representatives told the Washington Post that the shutdown could mean tax refunds will be delayed — possibly for months. One IRS customer service employee, who normally fields questions from up to 50 taxpayers a day but who won't be working during the shutdown due to financial hardship, said that the 2019 tax filing season is “going to be a disaster all around.”

So Will Tax Refunds Be Delayed in 2019?

People certainly seem concerned about their tax refunds while the government is partially shut down. According to a new survey conducted for Salary Finance, more than two-thirds of Americans say they are "a little worried" or "very worried" that they won't receive their tax refunds on time.

A delay in tax refunds could cause major problems for many taxpayers, and for the elected officials being blamed for the government shutdown. “The politicians are playing with dynamite if something goes wrong during filing season,” former IRS Commissioner Larry Gibbs told Politico. “If you don’t pay refunds to people who are expecting them on a timely basis, all hell breaks loose.”

The current government shutdown has already stretched for more than a month, and is officially the longest shutdown in U.S. history. The truth is that it's impossible to predict exactly how this unprecedented situation will affect tax refunds.

In normal years, the IRS processes most e-file returns and issues tax refunds with three weeks. So, by late February we should have a clearer idea if tax refunds are being delayed because of the shutdown.

"The IRS should have sufficient staff to process routine returns, including refunds, relatively quickly," a recent post from the nonpartisan Tax Policy Center stated. However, the organization noted that "this year, taxpayers surely will run into problems," most obviously in the form of limited IRS staff available to answer taxpayer questions.

And that scenario is likely to result in tax refunds being delayed in 2019, the Tax Policy Center stated: "Taxpayers who can’t get answers from the IRS are more likely to make mistakes, and if their returns have errors, staff shortages may slow processing and delay refunds."