The IRS will furlough roughly two-thirds of its employees if Congress fails to reach a deal to keep the government open, according to the contingency plan the U.S. Treasury Department released late Thursday. During the first five business days following the shutdown, the IRS will keep 30,063 of its 89,944 employees at work. The 144-page plan features a detailed breakdown of which IRS employees will be furloughed and which would continue working.

A shutdown of the federal government would begin Oct. 1 if Congress does not pass the 12 appropriations bills necessary to fund the government for the 2024 fiscal year. Congress could also choose to enact a continuing resolution maintaining the budget at last year’s levels for a specified time period while budget negotiations continue. If the shutdown lasts more than five days, the IRS said it will need to reassess its ongoing activities to identify the necessary personnel adjustments.

During the shutdown, NATP members should expect slower IRS response time for mailed documents, increased processing time for paper-filed returns, no non-automated refunds and few available call-in resources. However, there are expected to be few disruptions for e-filed returns and automated refunds. Members should also let their clients know that most taxpayer assistance call centers will be closed.

Should the shutdown continue into filing season — or should another shutdown occur during the 2024 season — the IRS will continue the return processing activities necessary to protect government property, which includes tax revenue, and maintain the integrity of the tax collection process. The 2024 filing season runs from Jan. 1 through April 30, 2024.

What IRS activities will stop?

A summary of significant IRS activities that will stop during the shutdown includes:

• All audit functions and return examinations
• Issuing non-automated refunds
• Non-automated collections
• Taxpayer services, such as responding to taxpayer questions outside of filing season
• Legal work on any actions paused during the shutdown
• Processing of non-disaster relief transcripts
• Most headquarters and administrative functions that are not related to the safety of life and protection of property

Which IRS activities will continue?

The following is a brief list of the IRS functions that are expected to continue during the shutdown:

• Designing and printing forms for the upcoming tax season
• Mail processing
• Maintaining criminal law enforcement and undercover operations
• Completing and testing programs for the upcoming filing year
• Processing remittances, including Payment Perfection
• Taxpayer services during filing season
• Processing disaster relief transcripts
• Implementing initiatives included in the Inflation Reduction Act (not funded through appropriations)

We will continue to keep our members informed of shutdown-related operational changes at the IRS that may have an impact on their practices.

As an industry, the tax preparation business is classified as a mature business (compared to other industries) according to a recent report by IBIS World. By the word ‘mature,’ it means that the business of tax preparation services is wholeheartedly accepted by consumers in the United States. Not only is the act of filing taxes a requirement for most of the U.S. population, but a substantial percentage of consumers actively seek out paid preparers for help filing their tax return.

Yet, many changes have and will continue to disrupt this mature business ecosystem, both internally and externally. Some of these changes pose but a minor risk to the average paid preparer, while others could have major implications for long-term business success.

In the upcoming NATP sponsored webinar, ‘Future Proofing Your Tax Preparation Business: Running a Profitable Business Through Times of Change and Challenge’, attendees will have the opportunity to take part in a wide-ranging discussion between Shannon Bond, VP, Preparer Segment at Wolters Kluwer, and Robert Kerr, EA and Principal of Kerr Consulting, LLC, as they discuss top trends and changes within the industry. Here is a brief preview of some of the topics that will be up for discussion.

Economic conditions and the DIY movement

“It’s the economy, stupid,” is a famous statement that is recycled every political season by a number of candidates. Few can argue with how economic conditions drive consumer activity, even in the area of paying for tax prep services. However, competition in the paid preparer space remains high among the estimated 130,000 current tax establishments. Throw in the marketed appeal of do-it-yourself options and free e-filing offers, it comes as no surprise that the small to mid-sized tax preparer must find ways to bring more value to the table to compete in this environment.

Technology tools and strategies that level the playing field

With the biggest players in the tax preparation world seeking an even larger stake of the taxpayer consumer market in the coming years, what steps can the small to mid-sized preparers take to remain competitive and, dare-say, market-aggressive with their business? It is an interesting question that attendees will no-doubt benefit from getting straight answers on. Learn how cloud-based technologies, user-friendly self-service customer aids, as well as sound data security measures stand to make the smaller tax proprietor more attractive in the tax marketplace.

Growing your clientele in challenging times

Economic pressures and a desire to get more for less is an overriding dynamic for why consumers fire (or switch) their tax preparation professional. However, in recent years a growing trend has emerged whereby small to mid-sized accounting practices have begun culling their client rolls of what they view as less profitable tax compliance customers. This culling of tax compliance customers has the potential to open new opportunities for tax preparation businesses to add orphaned clients to their rolls for increased profitability.

The IRS plan to modernize, fee competitiveness, client data privacy + more

In conclusion, new studies, surveys and breaking news stories give tax preparers much to think about as they enter another tax season. So, whether it’s anticipation of greater service standards at the IRS for 2024, or what to make of the latest NATP Fee Study findings, attendees will gain greater clarity on these topics and more, as a result of attending this comprehensive webinar discussion. Register to join this free CPE credited live webinar today.

Question: Linda inherited an IRA from her brother, Mark, who died at the age of 78. Mark was taking his required minimum distributions (RMDs). Linda is 67 and is still working. She is considered a noneligible designated beneficiary. When must Linda complete her distributions from the inherited IRA account?

Answer: Current rules stipulate that Linda must complete her inherited IRA distribution within 10 years of Mark’s death. However, proposed regulations issued in February 2022 suggest that RMDs must be taken annually, rather than simply before the end of the tenth year. The proposed regulations are intended to incorporate the legislative changes included in the SECURE 2.0 Act of 2022. The proposed regulations, once finalized, were originally set to be effective for 2022 and later calendar years. However, in IRS Notice 2023-54, the agency announced that final regulations on RMDs would apply no earlier than 2024. Proposed regulations are not law until finalized, but some advisors suggest that taxpayers who have inherited IRAs should begin taking the distributions annually.