The government shutdown is compounding delays and other ongoing issues at an already pared-down IRS, leading to significant taxpayer service breakdowns. Brian Fine, a CPA and partner at Alpine Mar, described the real-world consequences taxpayers and practitioners are experiencing now, as well as agency workers themselves.
Taxpayers Feeling the Squeeze
The IRS began the year with over 100,000 employees, but between the Trump administration’s voluntary resignation program and subsequent rounds of layoffs, about a quarter of the workforce is no longer at the agency. Since the beginning of the shutdown, which began October 1, roughly half of the remaining workforce has been furloughed.
In an October 10 filing with the U.S. District Court for the Northern District of California, the government signaled that additional ‘reductions in force’ are coming, a reversal of prior assertions that there were no plans for further cuts. Speaking with Checkpoint, Fine called the prospect of another wave of furloughs – approximately 1,300 IRS employees – “terrible,” and expressed sympathy for the federal workers affected, noting that “these are people’s livelihoods.”
The impact of a smaller, partially shuttered IRS is already being felt by taxpayers, who face longer resolution and correspondence times. As the AICPA noted, the creates a perfect storm where the agency cannot provide baseline services. Fine described his frustration with inconsistent responses from the IRS involving similar fact patterns.
“Two companies, same ownership, same exact issues, same years, same technology used to file the 1099s,” he explained. “One company – all the years we’ve gotten responses back … all the civil penalties abated. The other company – we keep getting notices from two different departments. One says we need 60 more days. The other says that this is a notice of intent to place a lien on your property … it’s just unfortunate.”
A ‘Horror Story’
Fine also shared an anecdote of a recent client experience that encapsulates the toll the cuts and shutdown are having on the tax system. A client entitled to a $40,000 refund received a notice claiming her W-2 was not attached, even though the return was filed electronically. When anyone “gets a letter from the IRS,” their “heart rate spikes,” said Fine. “You get concerned. ‘What did I do wrong?'”
Despite Fine faxing all the requested payroll documentation, months went by. The client, who was “banking on that refund,” received a new notice in September claiming she owed half a million dollars in taxes, penalties, and interest. The ensuing phone call with his distraught client, Fine said, “lasted all 42 miles” of his commute.
After eventually getting through to an agent, he was told the IRS never received his response. The issue was eventually resolved, but the client’s refund was still short by $5,000 due to interest that was incorrectly applied, requiring yet another form to be filed.
“I’m just kind of appalled that I have to go through the same process,” said Fine, frustrated on his client’s behalf.
‘Not the Agents’ Fault’
Despite his frustrations, Fine was quick to commend the IRS employees who are still working. He said that despite the difficult circumstances, the agents he has spoken with “do not seem down” and are not complaining, with likeable personalities that make them “lovely” to “work with.”
In his practice, Fine said he makes it a point to build rapport with agents, which goes a long way with issue resolution. He emphasized that the systemic problems are not the agents’ fault, and he does not encourage practitioners to “bash” the IRS when addressing a client’s distress.
Fine stated he “truly do[es] commend” IRS and other federal employees who are “working with minimal or no pay, and still … doing their job with a smile and a positive attitude.”
Tax Season Delay?
Looking ahead, however, Fine is concerned about the IRS’ readiness for the upcoming tax filing season, saying it is plausible that the agency may not be ready to start accepting returns on time. He attributed this to a lack of personnel available “to go through the testing and make sure that the systems are ready to process tax returns.”
Fine’s advice for taxpayers is clear: be prepared anyway. He urged taxpayers to “be ready to file that tax return” as soon as the system opens. He stressed the importance of filing electronically, calling it the “way to go” because it is expedited, secure, and avoids delays associated with manual processing and paper checks.
Long-term, Fine has worries that constant uncertainty could have a lasting effect on recruitment. His primary concern, he said, is that it “could hinder very talented people that care about the system from wanting to work at the IRS.” He questioned how long employees would tolerate such instability, but hopes his gut feeling “isn’t right, because the taxpayers don’t deserve it.”
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