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IRS collecting money but not sending tax refunds during shutdown

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The IRS is still collecting taxes during the government shutdown, but it isn't sending refunds — and it also has stopped complying with a subpoena to turn over documents to members of Congress who are investigating the agency's targeting of tea party groups.

The House Oversight and Government Reform Committee and the House Ways and Means Committee have stopped getting documents from the Internal Revenue Service.

"The IRS has indicated to the committee that their furlough decisions will affect the agency's responsiveness to committee requests, including the outstanding subpoena," said Ali Ahmad, a spokesman for the oversight committee.

The government shutdown, which began Tuesday morning, has kept home an estimated 800,000 federal employees, including more than 85,000 who work for the IRS, according to the agency's contingency plan. That leaves slightly more than 9 percent of the IRS staff on the job.

That is too few to process refunds but does not let taxpayers out of their obligations.

"Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law," the agency said in its guidance for taxpayers. "The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time."

An important deadline is looming: Taxpayers who requested a six-month extension on their 2012 returns are still required to file by Oct. 15. The agency said all other deadlines remain in effect.

Edward Karl, vice president of taxation for the American Institute of CPAs, estimated that 6 million to 7 million people have filed for extensions and are facing that deadline this year. Although the percentage is small — about 120 million 1040 forms are filed each year — a lot of people may have questions with nowhere to turn.

"There will have to be some kind of a process, and they might handle that on a case-by-case basis. They tend to be reasonable on these types of things where they may not give blanket relief but they will notify their staff of possible one-off situations where people need to be a little bit more lenient," Mr. Karl said, though he would not speculate about a situation that would warrant leniency.

While the IRS will not be open to answer account-related questions, Mr. Karl said, CPAs are a good resource for people with questions. He said some may have to file incomplete returns and amend them once questions can be answered.

The IRS has released its shutdown plan and has information for taxpayers on its website, but Mr. Karl said he expects the agency to issue more information if the shutdown continues and looks like it will overlap with the Oct. 15 filing deadline.

With most of the agency shut down, nobody was available to answer calls seeking comment Wednesday.

The good news for taxpayers is that audits also are halted. The bad news is that they will be rescheduled once the agency returns to full operation.

Meanwhile, the IRS division accused of targeting tea party groups for special scrutiny in their applications for tax-exempt status has been reduced, but some officials are still on the job.

According to the IRS contingency plan, seven employees in the exempt organizations division are deemed essential: "1 Director, Exempt Organizations (EO); 1 Director, EO Examinations; 1 Manager, Examination Programs and Review; 1 Examination Special Support Employee; 1 EO Technical Processing Unit employee; 1 Manager Processing Section; and 1 Manager, Adjustment Unit (EO Determinations)."

"This staff will ensure statute protection and processing of remittances as needed," the IRS said.

Another 10 employees from the counsel's office who are detailed to the tax exempt and government organizations division also are still on the job. The IRS said they are at work to handle critical court cases.

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