Tax Talk Thursday: The IRS Government Shutdown: What It Means and What Taxpayers Can Do

When Congress fails to pass a budget or temporary funding bill, the federal government enters what’s known as a shutdown. During a shutdown, agencies that rely on annual funding—like the Internal Revenue Service (IRS)—must either scale back operations or rely on contingency funds. While certain critical services continue, many administrative and support functions slow down or stop altogether, directly affecting taxpayers and tax professionals alike.

How the IRS Is Operating During the Shutdown

At the start of this year’s shutdown, the IRS remains temporarily funded through money allocated from the Inflation Reduction Act. That means for the first few days, taxpayers may not notice any immediate change. But if the shutdown continues beyond that short window, significant disruptions could begin. The Treasury Department’s contingency plan anticipates that nearly half of IRS employees could be furloughed—sent home without pay—if the funding lapse extends beyond a few days. In past shutdowns, this has led to slower processing times, delayed responses to correspondence, and backlogs in paper filings.

What Taxpayers Can Expect to Be Affected

For taxpayers, the biggest impact comes down to timing. Electronic returns and payments generally continue to process automatically, but paper returns, amended filings, and correspondence that require manual review can be delayed. If you’re waiting for a refund, you may see slower turnaround times, especially if your return needs additional verification. IRS phone lines and walk-in assistance centers could also close or operate with minimal staff, making it harder to get questions answered or resolve notices. Audits and appeals are typically suspended unless a statute of limitations deadline is approaching, and certain compliance actions may be postponed temporarily.

What Will Continue to Function

It’s important to note that while some functions pause, others keep going. The IRS will still collect revenue, accept electronic filings, and process payments. Filing deadlines and payment due dates do not change simply because the government is shut down. Payroll deposits, estimated tax payments, and other legally mandated obligations remain in force, even if the agency is operating at limited capacity. In short, taxpayers are still expected to file and pay on time—even if the IRS takes longer to respond.

Practical Steps You Can Take Now

So what can you do while the government is in this holding pattern? The most effective step is to file electronically and use direct deposit for refunds. E-filing ensures your return moves through the automated system, which continues to run even with limited staff. Avoid sending paper correspondence unless absolutely necessary, and keep digital or printed copies of all submissions in case of processing delays. The IRS online account tools and “Where’s My Refund?” tracker generally remain operational, so you can still check the status of your return online. If you’re facing a deadline or tax issue that requires clarification, consider working through a licensed tax professional who can guide you through temporary workarounds.

Planning for Possible Delays

Finally, it’s wise to plan for possible delays in refunds and communications. If your financial plans depend on a timely refund, try to build flexibility into your cash flow. For small businesses, ensure payroll and estimated payments continue as scheduled to avoid penalties later. And for those with ongoing audits or compliance matters, be patient—most cases will resume once the government reopens, but the IRS will likely need time to catch up.

Why It Matters to Everyone

A government shutdown may be political at its core, but its effects ripple through the lives of taxpayers and businesses alike. Reduced service levels, slower correspondence, and processing delays create frustration and uncertainty, especially during key tax deadlines. While we can’t control when Congress resolves the impasse, we can take practical steps to stay compliant and reduce disruption. If you’re unsure how a shutdown might affect your filing, refund, or payment situation, reach out to a trusted professional for personalized guidance.

Government shutdowns may come and go, but your tax obligations remain. Staying proactive—filing early, keeping good records, and using digital tools—can help you minimize stress while Washington works things out. For help navigating any IRS delays or questions during the shutdown, contact us at info@mkhstaxgroup.com.