Treasury weighing whether to issue tax refunds during shutdown

The Treasury Department plans to announce probably Wednesday or Thursday whether millions of Americans will see their tax refunds delayed this year because of the partial government shutdown.

The agency is divided over whether it has the legal authority to both summon furloughed employees back to work to process the refunds and also if it has the power to issue the payments amid the standoff over President Donald Trump’s demand for funding of a border wall.

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Officials have been examining the issue exhaustively, a senior administration official said, and expect to have answers around midweek.

“We’re trying to figure out legally what the right answer is here — what we’re allowed to do,” the official said. “If it was settled, I’d tell you, but it’s not.”

The prospect of delayed refunds hangs over the budget impasse, now in its third week with no sign of lawmakers resolving the dispute. Any holdup in refunds threatens to amp up public unhappiness with the standoff because of the sheer number of Americans who receive refunds.

More than 70 percent of taxpayers typically get money back at tax time and, for many, it is the largest single payment they receive all year. Lower-income people, who are particularly reliant on refunds, tend to file early.

Tax-filing season typically begins in late January, with refunds starting to go out the door soon thereafter. Last year, by Feb. 16, the IRS had doled out $103 billion in refunds to 33 million Americans.

The legal questions the department is now working through are arcane. There is “some art as opposed to science in determining who can get recalled during a shutdown,” the official said.

Also, there is a pot of money the agency could potentially use to keep refunds flowing on time, known as a “continuing appropriation,” but officials are divided over whether it is affected by the shutdown.

“There are really good arguments both ways,” the official said.

Treasury’s decision will include details like when this year’s filing season will begin, the official said.

The official criticized the “frenzy” of speculation over the prospects of refunds being held up.

“I just don’t know that it’s worth all the time and effort that it’s getting,” the official said. “It’s speculation at this point, until the decision is made.”

House Democrats, hoping to increase pressure on the administration, plan to move legislation this week funding the IRS.