IRS Must Stay Fully Staffed in a Shutdown to Avoid Taxpayer Harm

The American Institute of Certified Public Accountants got it right. The Office of Management and Budget’s guidance didn’t.

This week, the AICPA sent a letter to IRS and the Treasury Department, copied to all members of Congress, supporting using funds from the Inflation Reduction Act to allow the IRS to continue helping taxpayers and tax professionals during a government shutdown. A continuing resolution currently keeping the government open expires on Feb. 2, 2024.

During a shutdown, the IRS and every other federal agency must comply with the requirements of the Antideficiency Act, which bars agencies from spending funds during a lapse in appropriations and prohibits them from employing personnel, unless specifically authorized by the OMB.

Considering that the IRS generates at least 95% of the gross revenue that funds our country, the agency—and funding sufficient to properly maintain its vital operations—is of utmost importance.

OMB guidance for fiscal year 2024 determined that only 33.4% of IRS employees will be exempt from a shutdown and allowed to keep working. In fiscal year 2023, the OMB’s guidance allowed the IRS exempt 100% of its employees form being furloughed.

The IRS contingency plan for fiscal year 2024 narrowly interprets the OMB’s guidance to exempt only activities that encompass human safety and protection of property. It hamstrings the agency’s ability to continue vital operations during a shutdown.

Taxpayers and tax professionals are unable to contact most IRS employees during shutdowns. All furloughed employees are prohibited from accessing their government phones and laptop computers during a shutdown. Under the current plan, the Taxpayer Advocate Service and IRS walk-in taxpayer assistance centers would be closed, and all audit, examination, and appeals activities would be suspended.

Any shutdown damages current and near-term future return and mail inventories as well as overall operations. Even a partial IRS shutdown hurts the morale of the IRS workforce and its ongoing efforts to recruit new employees. Current and prospective IRS employees can go elsewhere to work at places that aren’t impacted by a dysfunctional Congress.

The IRS’s contingency plan allows for an amendment that would exempt additional positions to accommodate the 2024 filing season. This is why the AICPA’s letter is important.

It’s also why other organizations should join in and ask the IRS, Treasury, and Congress to update the plan to include filing season specific activities. They could take an approach similar to the 2023 contingency plan, in which the IRS had authority to exempt 83,092 of 83,092 employees by using funding from last year’s tax and climate law.

If the 2024 contingency plan isn’t amended to authorize a substantial increase in exempt employees to provide vital services, the IRS will lose much of the positive momentum gained from significantly enhanced services and modernization efforts in the past year.

None of us want a re-occurrence of interruptions even remotely reflecting those of the Covid-19 pandemic. Scaled-back operations come at the significant cost of adversely impacting most every facet of IRS operations. Shutting down important IRS operations, especially during filing season 2024, is simply unacceptable.

The IRS must be allowed to use the tax and climate law to avoid further damage to important taxpayer services as well as significant, ongoing modernization and compliance efforts. Any other approach is unfair to taxpayers, tax professionals, and IRS employees.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Charles Rettig was IRS commissioner from 2018 to 2022. He serves on the board of directors at K1x, a digital K-1 packet production platform, and previously was a tax lawyer based in Los Angeles.

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