IRS Shutdown and Its Impact on You

By Stanley Rose October 22, 2025

At the time this article is written, the U.S. Government shutdown is poised to enter its fourth week. A “shutdown” seems a bit of a misnomer, because it never represents a complete closure of government. Instead, many agencies continue to function with relatively minimal impact (from a citizen’s perspective) because their funding is provided through means other than the Congressional appropriations process, whose wheel-spinning has created the shutdown. Many government employees continue to work and are currently paid, while many others are working without pay and will receive back pay once the shutdown ends. Others have been temporarily laid off. In spite of the fact that any shutdown is only a partial one, it has created some setbacks within the IRS, and those setbacks will continue to impact people for some time, even if the shutdown ends right away.

The shutdown began on October 1, and under preestablished contingency plans, most IRS employees continued working for 5 more days. Since then, though, close to half of the agency’s employees have been furloughed, and only around a third of the total surviving IRS headcount work in customer-facing positions. The timing is unfortunate, as the shutdown launched in the middle of one of the busiest filing seasons, with most tax returns that were extended in March or April being due between September 15 and October 15.

How will this impact you, as a taxpayer?

First, IRS responses and other actions to be taken in response to correspondence sent to the IRS undoubtedly will be greatly delayed. Also, our ability to contact the IRS and reach someone by phone who can answer questions or provide a status update on pending matters will be changed from its normal setting of “difficult” to another setting best described as “nearly impossible.” One group of taxpayers who will be very directly and adversely impacted are those who recently filed tax returns in advance of the October 15 extended filing deadline and are looking forward to receiving tax refunds. It is highly likely that those refunds will be significantly delayed – but by how much, we don’t know. A number of our clients are still awaiting refunds requested on returns filed in April, and if those returns have not been fully processed, it seems likely that taxpayers who filed later than that should be prepared to wait much longer for their requests to be processed. Ironically, it is quite possible that automated IRS notices may still be generated and mailed by the IRS, creating a situation where the IRS can reach the taxpayer, but the taxpayer cannot reach the IRS because the individuals who would receive and process incoming taxpayer correspondence have been furloughed. New trainees and many responsible for implementing the significant features in recent tax legislation number among those still allowed to report to work. They, however, at least for now are working behind the scenes and many who we would interact with for somewhat routine matters are missing in action.

This means that presently and in the near future, we need to (1) drastically lower our expectations of what the IRS can do for us and (2) recalibrate our estimates of how long it will take them to address just about anything.

Some of you may be asking how your already-low expectations can be lowered even further, given the time lags, confusing notices, and difficulty reaching the IRS in recent years – declines in service that my colleagues and I can attest are very real and routinely have experienced firsthand. To that I would say please extend a little patience and understanding. In spite of a bad reputation, the vast majority of the IRS agents I have encountered over the years have been good people – pleasant and willing to help. But even the most dedicated and hardworking agent is left confounded by an agency with a structure that prevents efficiency. It would be difficult enough for dedicated agents to navigate internal protocols if their landscape remained relatively stable. Instead, they have to deal with constantly-changing rules from a never-ending blizzard of new tax legislation imposed on them by a fickle Congress.

Observation: If Congress would stick to writing tax laws solely to raise money, it might be easier for the IRS to administer the rules and for taxpayers to comply with them. But Congress also conjures up tax laws designed to encourage numerous social goals, having figured out long ago that taxpayers are easily motivated through their wallets. (For this reason, a simplified flat tax will never see the light of day.) Then, Congressional priorities (and administrations) change, and the rules are overhauled yet again – often resulting in laws made up of word salad that cannot be practically administered. Just once, I’d like to see Congress invite an accountant or tax attorney into the room before implementing a law, so they can be told how unworkable in the real world their proposals really are. But they won’t, and for this reason, IRS agents and practitioners like me will constantly be hopping.

With this backdrop, we sympathize with clients who are stuck in limbo awaiting much-needed refunds or resolutions to issues raised by IRS notices (many of which make no sense whatsoever). But we are dealing with an agency running on a fraction of its workforce whose employees, when they are allowed to report for duty again, will be returning to the nearly insurmountable backlog they left behind, which they will be unable to locate until they shovel down through a newly-filed heap of tax returns added during their absence. This will require some patience – by those who await tax refunds and by others who simply await a return to the IRS’ “normal” level of disarray.

For more information, please contact Stanley Rose or your BNN tax service provider at 800.244.7444.