The American Institute of Certified Public Accountants (AICPA) has argued that the Office of Management and Budget (OMB) has misjudged the requirements for IRS personnel during government shutdowns. Recently, the AICPA sent a letter urging the Internal Revenue Service (IRS) to make use of funds from the Inflation Reduction Act in order to remain functional in case of a government shutdown, emphasizing how crucial this is for taxpayers and tax professionals alike.
Federal agencies like the IRS must adhere to the constraints of the Antideficiency Act during a shutdown. This legislation prevents them from spending during a funding lapse and limits their hiring of personnel without a specific mandate from the OMB. The IRS, responsible for generating 95% of the gross revenue of the US, is of paramount importance in these situations, particularly to maintain its critical operations.
The OMB’s guidance for the 2024 fiscal year indicated that a mere 33.4% of IRS employees would be exempt from potential shutdowns and continue working – a sharp decrease from 100% in 2023 fiscal year. This selective exemption policy, based on the IRS contingency plan for 2024, only includes activities directly linked to human safety and property conservation, critically limiting the agency’s capacity to sustain vital services during a shutdown.
This situation considerably obstructs contact between taxpayers, tax professionals, and government employees during a shutdown, as all furloughed employees are prevented from using their government-designated phones and laptops. The current contingency plan would result in the closure of the Taxpayer Advocate Service and IRS walk-in taxpayer assistance centers, and a pause on all audit, examination and appeals activities.
Both entire and partial shutdowns gravely harm ongoing and future mail and return inventories, as well as overall operations. This scenario also negatively affects the morale of the IRS workforce and recruitment attempts of new employees, leading many current and potential workers to seek employment in shutdown-proof environments instead.
An essential aspect of the IRS contingency plan allows for tweaks to exempt additional roles prior to the 2024 filing season. Herein lies the importance of the AICPA’s letter, which calls for other organizations to urge the IRS, Treasury, and Congress to amend the plan to allow for crucial filing season related activities.
If the 2024 contingency plan is not modified to permit a major rise in exempt employees providing critical services, the IRS could experience a setback in its recent increased service delivery and modernization efforts. Therefore, it is crucial that the IRS be granted the right to use the tax and climate law to prevent further damage to key taxpayer services, as well as ongoing modernization and compliance projects.
Please note that the opinions expressed in this article do not necessarily represent those of the Bloomberg Industry Group.
The author, Charles Rettig, was the IRS commissioner from 2018 to 2022. He currently serves on the board of directors at K1x, a digital K-1 packet production platform, and has previously worked as a tax lawyer.