FAA Shutdown Creates a Mess for Airlines, IRS and Travelers

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Justin Sullivan / Getty Images

An unfinished FAA control tower at Oakland International Airport.

Updated 4:40 p.m., Aug. 4.

With the FAA shutdown threatening to stretch on for weeks, the travel and airline industries greeted with relief a deal announced by Congress on Thursday that would allow the agency to resume full operations. But throughout this nearly two-week impasse, it became clear travelers were the ones being taken for a ride. The Congressional deadlock that precipitated the shutdown resulted in airplane inspectors working without pay and the FAA losing $25 million a day — unclaimed money that could have added up to $1 billion by the end of the month when lawmakers return from their summer recess. (“Recess” feels like a very apt activity for Congress, given how well they’ve been playing with others lately.)

But the airlines haven’t been shy about taking advantage of the tax-related pandemonium brought on by the FAA shutdown. Nearly every carrier with the exception of Spirit Air jacked up their ticket prices to absorb the difference travelers would have otherwise enjoyed in the absence of taxes being collected. It’s no chump change, either; the taxes average around $60 on a $300 ticket.

(MORE: 9 Ways to Save on Travel This Summer)

Travelers who bought their ticket before the shutdown but are flying now are entitled to a refund for the taxes they paid that weren’t collected, the IRS announced last week. Many airlines aren’t making it easy, though; US Airways and Delta both said they’ll set up procedures for passengers to request refunds on that unclaimed money, but reps from both airlines were vague when USA Today asked about the time frame for issuing refunds.

Still, that’s better than what the other airlines are doing: They’re punting the issue over to the IRS, which puts the onus on travelers to do the lion’s share of the legwork. This Wall Street Journal article says passengers need to fill out the four-page Form 8849, a Claim for Refund of Excise Taxes. Here’s what the IRS has to say:

[P]assengers who are unable to obtain a refund from the airline may obtain a refund by submitting a claim to the IRS. Because the IRS has no information about passenger ticket purchases or travel dates, travelers who are unable to obtain a refund from the airline will be required to submit proof of taxes paid and travel dates to the IRS under procedures that are under development. The IRS will provide additional guidance at a later date.

In other words, hang onto your receipts or ask the airline to provide you with proof of purchase, and check back on the IRS site for updates before diving into that lengthy claim form. Maybe other airlines will follow the lead of Delta and US Airways. In turn, hopefully those two carriers will return that unclaimed money quickly to travelers without making them jump through a bunch of hoops to receive their refunds.

Updated: The legislation approved on Thursday puts FAA employees back to work and reinstates the agency’s ability to collect taxes. What’s still up in the air, so to speak, is whether or not travelers who bought tickets for prices that didn’t include taxes during the “standoff window” will now have to cough up the extra cash. In addition, this legislation isn’t a long-term fix; it’s just another short-term funding bill, which means a reenactment of this scenario sometime in the future is possible.

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