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White House rules it can issue tax refunds during shutdown, plans to bring back some IRS employees

The word “taxes” is seen on the facade of the Internal Revenue Service (IRS) headquarters in Washington. (Andrew Harrer / Bloomberg)
The word “taxes” is seen on the facade of the Internal Revenue Service (IRS) headquarters in Washington. (Andrew Harrer / Bloomberg)
By Damian Paletta and Philip Rucker Washington Post

WASHINGTON – The Internal Revenue Service plans to pay tax refunds in the coming weeks, administration officials say, after the White House decided Monday it was legally permissible to process tax returns during a government shutdown.

The decision reverses past IRS policy, which had previously prohibited tax refunds from being paid while much of the agency’s staff was sent home during a shutdown.

But the White House’s Office of Management and Budget determined on Monday that paying tax refunds was a permissible practice and would be allowed to proceed, according to a senior OMB official.

Final decisions were still being worked out, including how many people will be brought back to work at the IRS and when the tax filing season will begin.

Millions of Americans file income tax returns by April 15 for income they earned the previous year, and if they overpaid their taxes then the government issues them a refund. These refunds can often be around $2,000 or $3,000.

Paying these tax refunds could help the White House avoid an enormous political and economic mess next month.

From Jan. 29 through March 2, 2018, more than $140 billion in tax refunds were issued by the IRS. If that money had been frozen during the government shutdown, Trump could have found himself under enormous pressure to change his approach and back down in his demand for money to erect sections of wall along the Mexico border.

The OMB decision is the latest in a string of initiatives pushed by its acting director Russell Vought, who is directing agency lawyers to look at past decisions anew and see if there’s a way to lessen the impact of the shutdown.

“We have tried to make this as painless as possible consistent with the law,” Vought said at a White House briefing.

Similarly, the other OMB official said, lawyers are looking to see what powers they have to continue paying food assistance next month even as funding for the Supplemental Nutrition Assistance Program is set to expire. A decision on this could come in the next few days.

The official spoke on the condition of anonymity to discuss the administration’s policy deliberations.

Large parts of the federal government have been shutdown since Dec. 22 amid a fight between the White House and congressional Democrats over whether to spend more than $5 billion on parts of a wall along the Mexico border.

Trump’s decision to trigger the shutdown was only made two days before it began, leaving many agencies unprepared. Some have had to reverse decisions or scour their budgets for extra money to try and minimize the impact, a process that intensified last week when Trump said the shutdown could continue for more than a year.

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