The recent passage of the Tax Cuts and Jobs Act (TCJA) was the most sweeping overhaul of the tax code in over thirty years. Coupled with an ongoing partial shutdown of the U.S. government, these two events mean that the 2019 tax filing season for 2018 returns will be anything but ordinary. Nearly every taxpayer will be impacted by the new tax law in some way. The TCJA affects all types of taxpayers - individuals, corporations, passthrough entities, trusts, and estates. Although a large amount of official guidance related to the TCJA was released by the IRS in 2018, much additional guidance is expected to be finalized and released throughout 2019. Originally, the IRS predicted that it would have all TCJA-related proposed guidance issued before the start of the 2019 tax filing season. However, Acting IRS Commissioner David Kautter told Congress last year that it would likely take at least two years for the IRS to issue guidance on the entire TCJA.
Currently, there is no end in sight for the partial government shutdown, due to a continuing inability of both parties to agree on certain border security issues. While certain IRS operations related to the TCJA implementation continue, other critical functions of the IRS are currently inoperative. Any changes to the tax code require the IRS to determine what data must be captured on the tax return, which may include revisions to tax form lines, form instructions, IRS publications, and tax processing software. Further, IRS return-processing software and databases must be modified to capture and organize data, while internal IRS training procedures must be developed so that IRS employees can properly respond to taxpayer and practitioner questions. All of these steps require a considerable amount of time to implement, and the shorter the time period for implementation, the greater the risk of problems for the IRS, practitioners, and taxpayers. This year, there are significant changes to many tax return forms and instructions as a result of the TCJA, and some 2018 tax forms have yet to be finalized by the IRS.
The IRS has currently furloughed approximately 70,000 employees, accounting for 87.5% of its workforce, according to House Ways and Means Committee Chairman Richard Neal, D-Mass. As a result, the IRS has currently ceased certain vital taxpayer services, including phone lines for answering taxpayer and practitioner questions and the processing of information faxed to the IRS. Once the tax filing season begins (the IRS has announced that the 2018 filing season will begin on January 28, 2019), it is quite likely that abnormally high demands on IRS services, including telephone assistance and other services, may create delays in tax return finalization, efiling, or IRS processing.
Adding to the uncertainties of this year's filing season are the incomplete proposed regulations to be issued by the IRS with respect to the complex new law changes under the TCJA. Since official guidance has not been finalized for many of the law changes, there will be increased uncertainty for all taxpayers and practitioners in the application of some of those laws. Extensions of time to file tax returns may be recommended more frequently by practitioners this year, with the hope that the IRS will finalize much of the still-incomplete guidance a little later in the year.
As with any law change, uncertainty is normal. Based on recent extensive tax law changes and the current reduction in the IRS workforce, taxpayers should anticipate possible delays in the preparation and/or filing of tax returns. Additional time may be required to finalize certain tax returns due to the increased complexity in the laws. As your trusted advisor, we are here to answer your questions and provide guidance on what the changes mean for you. Please do not hesitate to contact us at (901) 761-3003 if you have questions or concerns.
We wish all of our clients and friends a healthy and prosperous 2019!
The Marston Group, PLC