The IRS can't pay out tax refunds during the partial government shutdown, and it's the biggest problem for people who need it the most
- Tax refunds may be delayed if the ongoing partial government shutdown continues, according to the Wall Street Journal.
- A delay in tax refunds may affect the taxpayers who need it the most - low-income households, who typically file taxes sooner than wealthy filers because they need the money more.
- This comes during a year when many American taxpayers should be expecting bigger refunds than normal.
If the shutdown continues, that could mean a delay in "billions of dollars in income-tax refunds," reported the Journal's Richard Rubin.
During the shutdown, the IRS has lost funding and is operating with around 12% of its employees, according to Rubin. While it can process tax returns, keep systems running, and conduct criminal investigations, it can't run audits, answer off-season taxpayer questions, or allocate refunds, he reported.
The IRS typically begins accepting tax returns at the end of January and early filers can see refunds hit their account as early as February.
If the shutdown is resolved in a few weeks, it may not affect taxpayers, but the current situation increases the likelihood of a delay in refunds - which could put pressure on reaching a deal, Rubin wrote.
But if a deal isn't reached anytime soon, those who need the refund the most are the most likely to be affected.
"For many Americans, the tax refund is the single largest financial event of the year, and the people who tend to file early in the season are taxpayers who count on large refunds to pay down debt, catch up on bills, or make major purchases," Rubin wrote. "Those are disproportionately low-income households that benefit from the earned-income tax credit and other provisions that give them no income-tax liability or a net benefit from the income-tax system."
Former IRS director of legislative affairs Floyd Williams told Rubin that wealthier taxpayers typically file later and shouldn't be affected to such an extent.
This all comes during a year when many American taxpayers should be expecting bigger refunds than normal under the new GOP tax law that went into effect in 2018.
The bank found that most married filers with two children would see the biggest boost in their refunds for 2018 compared to 2017, particularly those making between $125,000 and $400,000 and those making under $40,000 a year.
However, single filers and residents of higher-tax locales like New York and California may see smaller refunds under the new tax law.
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