Taxpayers who file early in tax season may not receive their refunds in a timely manner because of the partial government shutdown that began on December 22, according to The Wall Street Journal.
If the shutdown continues, it could mean a delay in “billions of dollars in income-tax refunds,” The Journal’s Richard Rubin reported.
During the shutdown, the IRS has lost funding and is operating with about 12% of its employees, according to Rubin. While it can process some 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 lawmakers to reach a deal to fund the government, 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.”
Floyd Williams, a former IRS director of legislative affairs, told Rubin that wealthier taxpayers typically file later and shouldn’t be affected to such an extent.
Read more: Here’s a look at what the new income tax brackets mean for every type of US taxpayer this year
A delay would come in a year when many taxpayers should be expecting bigger refunds than normal under the new GOP tax law, which went into effect in 2018.
An analysis by UBS estimated an overall increase of $42 billion to $66 billion in tax refunds this year over 2017, Business Insider previously reported.
The bank found that most married filers with two children would see the biggest boost in their refunds compared with 2017, particularly those making $125,000 to $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.
The new tax law was already projected to increase the risk of a delayed start to the 2019 filing season, according to the IRS, plus there are some new changes for taxpayers to watch out for.
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