Remaining Inflation Reduction Act funds will let the agency keep working, but only for a few days. Get ready now in case the closure lasts longer.
If only Congress closed, we wouldn’t be so worried.
It’s looking more likely that the federal government will shut down, at least for a while.
The Internal Revenue Service, however, says that if the closure is short, it can make do.
How short? Five days.
The IRS has enough remaining Inflation Reduction Act funds to keep all stall on the job for five business days, according to the Treasury Department. So, the time frame of a regular work week will continue unaffected.
Or, in the words of the Lapsed Appropriations Contingency Plan for fiscal year 2026 released by Treasury, “normal IRS operations will continue.”
Short-term normalcy: Those normal operations will be conducted by the current 74,299 employees currently on the federal payroll after the IRS’ deferred resignation plan was implemented.
This scenario means the processing of filings and other actions, including taxpayer services and communications should continue through early next week without major disruption.
But if the impasse between Capitol Hill Democrats and their GOP colleagues and the White House goes longer than that, IRS activities will be scaled back to only “excepted” activities. These are described as those necessary “to protect government property, enforce the tax code, or support life and safety.”
Practically, that means we’ll likely see slower processing of tax refunds. Yes, some people who got extensions do get refunds. In fact, they were waiting for necessary documents so they could file for the correct amount of tax cash back they are due.
The reduction of staffing for only essential services also will mean less phone and correspondence support, both in general and in response to specific taxpayer and tax professional inquiries.
The IRS also will be slower to issue new guidance or responding to inquiries.
Finally, some tax examination and appeals actions likely will be delayed. While that might seem like a good thing, it’s really is not.
Taxpayers who have been working with the IRS and are close to a resolution of an audit or subsequent appeal would just as soon wrap things up sooner rather than later.
Tax actions to take now: The National Association for Tax Professionals (NATP) alerted its members to get ready, just in case.
“With uncertainty still looming, proactive planning is essential,” said the NATP. It recommends tax professionals consider the following steps.
- File and submit returns, extensions, and elections now to avoid potential delays.
- Make all payments and deposits on time.
- Pull transcripts and submit Form 2848 POAs while systems are fully operational. Set expectations with clients about possible service delays and limited IRS availability after the five-day window.
The NATP also reminded tax pros and us taxpayers that, as I noted this weekend, all statutory obligations, such as payroll deposits, estimated tax payments, and the like, still are due even during a federal government shutdown.
Preparing for a longer closure: If the shutdown extends beyond five business days, the NATP has this added advice.
- Document reasonable cause if late filings or responses become unavoidable due to IRS delays.
- Protect statutory deadlines. Track refund and collection statute dates and act conservatively with protective filings.
- Communicate with clients about expected refund timing, notice responses and audit activity.
Another tax pro group’s suggestions: The AICPA also had some thoughts on the potential shutdown.
In a letter to Treasury Secretary Scott Bessent, who is the acting IRS Commissioner, the organization that represents the accounting profession cited imminent tax-filing deadlines as a reason to keep the agency fully staffed.
The notable dates are the Oct. 15 extended deadline for individual tax returns, the Nov. 17 due date for tax-exempt organizations, and the Dec. 15 deadline facing U.S. expatriates.
“The processing of tax returns and collection of tax revenue is a critical government function that should continue regardless of a government shutdown, and, at a minimum, taxpayers should have recourse to protect their rights and property,” wrote Cheri H. Freeh, CPA and chair of the AICPA Tax Executive Committee.
Freeh also reminded Bessent of the well-documented negative impact of government shutdowns on tax administration. And she noted the potential effect on the upcoming 2026 tax season.
“The IRS must keep all essential positions working during the shutdown to help make the 2025 extended filing season operate as efficiently as possible and allow for a smooth start to the 2026 filing season,” she added.
The coming filing season already is expected to challenging, as the IRS and taxpayers and their tax pros must deal with several new One Big Beautiful Bill (OBBB) Act tax provisions that are effective for the 2025 tax year.
Hopeful, but…: But that’s still months away. Now, the possible government shutdown bottom line is that all of us need to take advantage where possible of this five-day window.
Or, as the cautiously optimistic Treasury Department put it when issuing the plan, “While we do not anticipate using the plan, prudent management requires that agencies prepare for this contingency.”
