Workers at IRS headquarters and in most regional offices are on furlough during the government shutdown — but taxes must still be paid on time. 1-800Accountant is offering extra telephone support during the shutdown.
At first glance, it might seem that the government shutdown will affect only those small businesses that sell products or services to the federal government or one of its agencies. According to Gary Milkwick, CPA and Vice President at 1-800Accountant, there are three surprising ways the government shutdown is likely to affect small businesses.
“How long the shut-down continues is the key question,” Milkwick says. “If it last beyond a few weeks, the impact will grow dramatically as more and more businesses and consumers are affected.”
One immediate impact for start-ups that have yet to acquire an employer identification number (EIN) is that you simply can’t start a new business until the shut-down ends. Without an EIN, a new business can’t file its articles of incorporation, establish an LLC, open a bank account, or pay salaries. “So if you were planning to start a small business, the government shut down means you’re out of luck, and you have no choice except to wait,” Milkwick says.
Tax Impact of the Government Shutdown
Taxes still have to be paid on time, whether the government is shut down or not, so there are no changes there. But if you have tax issues at hand that need to be resolved, the shutdown at the IRS may create problems.
“For example, if you were in the middle of an audit, or a tax abatement negotiation, then the process came to an abrupt halt overnight,” Milkwick explains. “That may be good for some taxpayers, because it gives you extra time to work with your tax adviser or CPA and it might delay the necessity of making a penalty or interest payment.
“On the other hand, if you are owed a refund, or your bank account had been frozen pending a resolution of a tax issue, you won’t get your money during the shutdown – and it will take some time for the process to get back to normal once the shutdown ends.”
A large number of IRS employees were included in the furloughs, including those who man the toll-free phone service lines for taxpayers. This means taxpayers will not have access to representatives who are normally available to answer questions on a variety of issues. Along with the suspension of these services, the shutdown is expected to disrupt IRS audits in many cases as well.
Although most of the IRS customer service reps are currently unavailable, all tax payments due today and in the coming days for as long as the shutdown persists are still due on or before their scheduled deadlines. These payments include both personal and business tax payments.
Bert Seither, the Director of Operations at 1-800Accountant, is offering telephone support to anyone in need of tax answers during this unusual time. “While the IRS’ toll-free support lines are down, we would like to offer support from our knowledgeable accountants, CPAs, and enrolled agents to anyone who needs assistance with their tax-filing responsibilities during this time,” Seither said in a statement.
“We understand that taxes can be confusing, especially when dealing with business taxes. Call, and we’ll help you work through your situation.” Calls to 1-800Accountant (1-800-222-6868) are answered during regular business hours.
SBA Loan Suspension
According to the Washington Post, in the days leading up to the shut-down, bankers flooded the Small Business Administration (SBA) with loan-guarantee applications, racing to secure funding before the lights went off. Over $1.2 billion in SBA loans were approved in the past two weeks, and if your business was approved for an SBA-guaranteed loan, then the shut-down will have minimal impact on you.
Milkwick says that the SBA is the primary source for long-term loans for small businesses, and that source of funding has been completely cut off. “If you were thinking about applying for a loan, or had started the process but not yet been approved, then the government shutdown will leave you hanging. No one knows when the shutdown will end, or how quickly the SBA will catch up on the backlog of applications when it reopens.
“This will leave small business owners and entrepreneurs waiting for the capital they need to start or expand a business.”
Employee Stress May Hurt Productivity
The stress on employees facing family problems caused by the government shutdown is one of those intangible issues that are hard to predict, Milkwick says. “Small businesses rely on their employees in ways that larger firms don’t. So if you have an employee who is worried because a spouse’s disability check didn’t arrive, or the daycare center they use for child care is closing, it will have an impact on your business,” he says.
Headstart programs that serve more than a million children with working parents may begin to close as soon as today, leaving families without child care. If your small business relies on workers who earn something close to the minimum wage, this may cause a significant disruption in their ability to work just as the holiday shopping season gets underway.
But parents with kids in a Headstart daycare program aren’t the only workers who may be affected by stress caused by the government shutdown. Do any of your employees, or the employees of your suppliers rely in part on disability or Veteran’s benefits? If they do, the cutback in payments for these families may affect your business. Milkwick points out that the impact doesn’t just affect sales.
“One of our clients discovered late last week that one of his best-selling products – a silk-screened t-shirt line – was actually made in a small business that hires disabled veterans. These vets rely on disability and veteran’s benefits for the bulk of their family’s living expenses – and the supplier notified retailers that its ability to deliver products during the critical holiday selling season might be affected if his workers are unable to come to work because of the cut in their family’s income.”Photo credit: This photograph of IRS headquarters in Washington, DC was offered under a Creative Commons License on Flickr by photographer David Boeke.