Government shutdown puts income tax refunds in limbo

Before the federal government shutdown started, the IRS drew up a contingency plan -- 110 pages about how the agency would handle the first five days of a shutdown.

But since the stalemate is about to extend into a third week, the agency is re-working its plan. But many Americans are left wondering, "What about my tax refund?"

James Gundersdorff, an accountant for 30 years who is licensed by the U.S. Treasury to operate in all 50 states, is trying to make sense of the mess he could be facing in the upcoming tax season.

"It's a huge deal," Gundersdorff said. "A lot of people do have a lot of money sitting on the table, and they will not get that money anytime soon."

Millions of Americans use tax withholdings in their paychecks as a sort of savings account, filing their taxes early in the year and anticipating a nice refund before spring.

But Gundersdorff said if Washington doesn't solve the shutdown by Martin Luther King Jr. Day, when returns typically start arriving to the IRS, refunds will be almost certainly be delayed.

"Once that happens...there will be no refunds until they reopen the government," Gundersdorff said.

The bottom line is that the longer the shutdown lasts, the worse the problems get for tax filers -- and especially those counting on early refunds in February or March.

"It's iffy, depends on when the shutdown ends," Gundersdorff said. "Let's say we get to the end of January, I would say no. If we finish this up next week, maybe."

During the shutdown, the IRS planned to keep about 12.5 percent of its workforce -- fewer than 10,000 federal workers. But as tax filing season gets rolling, some of those workers could be called back.

In any case, taxpayers will still be able to mail in their tax returns or submit them online, even if the shutdown stretches into next month. But when those refunds are processed and sent back to filers remains a big question mark.

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