No Fallout at IRS from Sequester . . . Yet

By Ken Berry

Now that the federal government's "sequester" has taken hold, what will the effect be on federal income tax refunds? None, according to an internal memo from Acting IRS Commissioner Steven Miller. 
But that doesn't mean we're out of the woods by any stretch. Miller acknowledged that furloughs for IRS employees could start this summer if the sequester remains in effect. Should that occur, it's likely to have a negative impact on the services provided by the IRS.
Despite a recent blip on the radar screen, which delayed the kick-off of tax filing season as the IRS scrambled to update forms in the wake of the "fiscal cliff" tax law, the IRS continues to hum along on all cylinders. You can expect the rest of the tax filing season to proceed as normal with no further delays anticipated. The deadline for filing 2012 returns without an extension will remain April 15 – the same as it is practically every year.  
The IRS vows that most taxpayers will still receive refunds within twenty-one days if they file electronically and have the money deposited directly into a personal bank account. 
Approximately 75 percent of individual filers are entitled to refunds. Last year the average refund was $2,803.
But the across-the-board spending cuts mandated by the sequester will eventually come home to roost if matters aren't otherwise resolved. Miller says the IRS has already trimmed the fat from its budget by extending a hiring freeze, reducing its travel and training expenses, and adjusting the use of its facilities and supplies. But he cited employee compensation as the biggest expense of the nation's tax collection agency.

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"At this point, we expect that every one of us would take no more than one furlough day per pay period . . . for a total of between five to seven furlough days," Miller said in the memo to IRS employees.

As a result, taxpayers should brace for a sudden impact. They might not be able to reach IRS staffers when they call the help lines, and taxpayers may experience longer waits at taxpayer assistance centers. According to a February 7 letter from the Treasury Department to Congress, the IRS also won't be able to examine as many tax returns. "This could result in billions of dollars in lost revenue and further complicate deficit-reduction efforts," the Treasury letter said. "In recent years each dollar spent on the IRS has returned at least $4 in additional enforcement revenue."
Nevertheless, Miller expects the troops to soldier on, regardless of the outcome of the sequester debate. "We recognize how distracting and difficult this news may be, but we know that you and your colleagues are dedicated public servants who will continue to deliver for the nation's taxpayers," he concluded in the memo.   
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