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- The IRS is beginning to process 2018 tax returns, the first year of filing after a massive tax overhaul.
- So far, initial data show returns are about 8% smaller this year compared to the same week in 2018.
- Wall Street says "no one:" not economists, elected officials, or civil servants know how returns will look this year because of the changes.
- Another government shutdown is possible on Friday if no funding deal between Republicans and Democrats is reached, putting Americans’ tax refunds at risk.
All eyes are on the Internal Revenue Service this tax season.
After the 35-day partial government shutdown, the longest in American history, left the agency unable to begin preparing returns as early as usual, returns are starting to trickle out.
Average return sizes have dropped 8.4% for the first week of the 2019 filing season compared to the same window last year, according to weekly government data. Notably, this is the first tax season since a massive overhaul of tax codes was passed in 2017.
Investment bank UBS says that uncertainty around the new tax brackets could have resulted in some of the change over last year.
"Withholding tables for 2018 may have been adjusted incorrectly," the bank’s economist Robert Martin said in a note to clients this week.
"As a result, nobody —not us, not other economists, not the US government —knows whether refunds will be larger or smaller than in past years, as small changes in the assumptions on any of the three factors lead to large changes in net payments to households."
It’s not just return size that’s down, either. Every single cumulative metric tracked by the IRS is showing a negative percent change compared to last year. Total returns processed is down 25% while total returns received is down 12.4%.
The IRS assures that these are only early metrics and that operations are going smoothly despite the staff shortages right at the beginning of tax season due to the government shutdown.
"IRS systems are operating smoothly to start the filing season, and refunds are being issued," the agency said, according to Politico. “The IRS encourages taxpayers to e-file as the quickest way to receive their refunds."
That could all change come Friday, though, when funding runs out on February 15. As lawmakers work together to write a bipartisan border security proposal, a heavy cloud of uncertainty remains.
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Source: Business Insider