Surviving, Thriving During the IRS Service Disruption

The Internal Revenue Service announced furloughs for nearly half its newly hired staff. According to IRS.gov, in May of 2024, the agency completed hiring nearly 30,000 new workers across audit, customer service, tax examiners and more.

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According to Michael Moffa, AIF^®, AWMA^®, CCE, CEPA^®, CRPC^® and founder of Prosperity Tax Advisors, Americans can expect the following consequences of this “slowdown”:

Delayed Tax Refunds

Fewer IRS employees available to process returns, mean taxpayers should expect longer wait times for refunds, especially for paper-filed returns. Not even electronic filings are immune to backlogs.

Limited Customer Service

Getting questions answered, resolving disputes, or clarifying notices will be harder as IRS phone lines and in-person assistance centers will have fewer staff.

Slower Processing of Amendments and Corrections

Amended returns, identity verification, and error corrections typically require manual review. With reduced staffing, these will likely stall, leaving taxpayers waiting months instead of weeks.

“For most Americans owed an Income Tax Return – they’ve over-paid and will have to wait for their checks. The money we save our clients remains in their pocket because Tax Strategies mitigate IRS tax debt. These strategies are defined and deployed before year-end resulting in investment vehicles and lower tax bills (often zero).

For taxpayers flagged for an Audit, this provides extra time to gather and prepare documentation,” said Moffa.

“To be clear, the IRS may move slowly during this period, but the code itself hasn’t changed. Only the agency’s ability to enforce and process it, eventually the IRS catches up once staffing normalizes,” explained Moffa.

Sophisticated taxpayers with good advisors may find more breathing room and delayed scrutiny. Moffa suggests the following:

Substantiation Guards Against Scrutiny, Audits

Select advanced tax strategies can draw heightened IRS review. With half the workforce furloughed, fewer examiners are available to audit or challenge aggressive positions. This is where airtight substantiation is critical.

More Time to Perfect Documentation

Cost segregation studies, transfer pricing, and partnership allocations among other tax strategies require robust paperwork. Slower IRS oversight means extra time to compile and strengthen supporting evidence before a review.

Delayed Overview of Complex Transactions

Certain offshore structures, pass-through entities, or timing differences can trigger IRS questions. A reduced enforcement arm means delayed challenges, or investigations.

Accelerate Refund-Generating Strategies

Our Forensic Tax Assessment often finds past overpayments. Refund-claim strategies (such as net operating loss carrybacks, excess credit applications, or over-withholding adjustments) may take longer to pay out, but the IRS will still owe interest if refunds are delayed beyond statutory timelines. This can actually enhance the benefit.

Not for your CPA

“According to the American Institute of Certified Public Accountants (AICPA), only 4% of CPAs are trained in tax strategies. Tax planning, audit and compliance come after tax strategy implementation,” explained Moffa.

About Prosperity Tax Advisors

An Advanced Tax Strategy Planning, Wealth Building, and Full Compliance firm based in Tampa, Florida. Staffed with a seasoned team of CPAs, forensic accountants, tax attorneys, and wealth advisors, Prosperity Tax Advisors helps clients stop wealth leakage, keep more of what they earn and protect their future.

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American taxpayers face IRS furlough - Tax Strategy expert offers what to expect and how to navigate the slowdown.