By Chris Morris
January 3, 2019

The Internal Revenue Service, like many other government agencies, is operating on a skeleton staff as the government shutdown continues with no end in sight. But don’t think that means you’re going to get a break on paying taxes.

The IRS will continue to process tax returns, regardless of the ongoing budget fight in Washington. However, when it comes to issuing refunds, that’s not going to happen until the government completely reopens.

Now it’s not much of a problem. Few people file taxes during the first week of the year. But as we get deeper into January and tax filing season begins, it could create a backlog with an economic impact.

Last year, the IRS issued $12.6 billion in refunds by Feb. 2. Two weeks later, the total hit $101.2 billion. And by March 30, 73 million households had received $212 billion in refunds.

The bulk of people getting refunds last year—some 65%—tucked them into savings, according to Morgan Stanley.

Another 35% paid down debt and 12% splurged on vacation, while 8% made a major purchase, such as a car or television.

There could be severe consequences for businesses if the shutdown affects consumer spending of refunds. Of particular note: The government closure is occurring in the first part of the year. Early filers tend to receive refunds, whereas people who owe the IRS typically wait until the last minute.

Even more frustrating? The average 2019 refund is expected to be 26% higher than 2018’s on average.

Additionally, filings could slow as accountants continue to fully understand all the changes in the 2019 tax law.

There are some bright spots. The IRS is permitted to bring in more workers as tax season approaches, which could mean refunds go out faster when the agency does start sending them. Also, the IRS typically doesn’t conduct audits during a shutdown. Regardless, those have been on the decline for a while now, due to budget cuts.

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