Uncertainty Looms in the US Tax System
The recently concluded US government shutdown depressed the morales of many citizens who had to live for a substantial amount of time devoid of any work and necessary payment. Although the shutdown has, at least as of now, been terminated, the repercussions are still quite evident. Taxpayers’ woes have significantly increased as the Internal Revenue Service’s ( IRS) response rate and services drastically curtailed after the shutdown.
According to a recently released government audit, a “shocking” number of taxpayers’ calls to the IRS were either not being picked up within a reasonable period, or not being answered at all. Five million pieces of mail were not answered and a striking 87,000 amended tax returns which were not processed during the shutdown. Similar unwanted issues with the services of the IRS persisted even after the shutdown. Even after many of the IRS workers came back to their jobs, less than 50 percent of the calls to the IRS’s account-management lines were answered.
Additionally, while last year, the hold time for callers was four minutes, the number crept up to a staggering 17 minutes this year post the shutdown. IRS officials defended the agency’s operations. A recently released statement noted the following “ We are continuing to assess the impact of the shutdown on our various operations across the agency and remain proud of the many IRS employees who have risen to the resulting challenges” further adding “ The IRS is committed to continually making improvements across our information technology, tax enforcement, and taxpayer service operations.”
However, questions have been raised regarding this year’s tax seasons before the shutdown, primarily due to the $1.5 trillion tax overhaul which was implemented by the Trump administration at the beginning of 2018. Individual income tax rates were reduced and several personal tax exemptions and tax breaks, such as the state and the local tax deduction, were done away with. An aura of utter bewilderment is looming above the tax scenario, as the exact amount to deduct from workers’ paychecks is currently unknown.
Analysts at Wall Street are also unsure of the situation. Morgan Stanley predicts that tax refunds will drive savings and spending rates initially this year. “ For your average taxpayer, it’s going to be a record high tax refund season. Much higher than they expected,” confirmed Ellen Zentner, chief United States economist at Morgan Stanley. The bank’s economists predict that the increase in tax refunds should result in increased consumer expenditures in the first quarter. However, such an increase may prove to be evanescent as rates are predicted to slow down in subsequent quarters drastically.