Part 5: Disruptions and Shutdowns

Greg PauloIndustry Insights, Uncategorized Leave a Comment

Part 5/5 Tax Filings and Recoveries

Regardless of political affiliation or rationale, government shutdowns materially affect recoveries in this period.

Currently (as of 2020) approximately 2.1 million people are directly employed by the US Federal Government in a civilian capacity (this excludes military service) per the Office of Personnel Management.

Periodically, political activity and considerations have triggered government shutdowns, delays in IRS processing of payments, or the amounts of payments.

In the event of shutdowns, two million government employees not getting a paycheck will affect their spending which in turn affects recoveries either directly or indirectly as their cutbacks trickle through the larger economy. Shutdowns also directly affect tax payments. Returns are not processed during a shutdown. Even when shutdowns are resolved, the disruptions in 2015, 2016, and 2019 had delayed or compressed the processing of returns and the payment of refunds.

Carefully watching the resolution and timing of these issues is advised and should be considered when crafting your tax season strategy. I recommend monitoring the IRS for pronouncements about tax season and filings or any delay the IRS may project in refunds or processing of returns. Of course, the returns are still due by the dates established by law, but the processing, acceptance, and provision of any refunds may be delayed as the result of shutdowns.

While this is the final in our 5-part series, we will have a special bonus posting next week to talk abut 2021 specifically, and the impact of COVID and relief packages.

Damon W. Edmondson
Chief of Analytics, Flock Specialty Finance

Contact FLOCK today to discuss trends for tax filings and recoveries.

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