After more than a month of paralysis during the longest government shutdown in American history, the Senate has reached an agreement to pass a funding bill. The measure still faces several steps ahead—it must pass the House of Representatives, return to the Senate for concurrence, and then go to the President’s desk for signature before the government fully reopens.
For now, most agencies—including the IRS—remain in limbo. The shutdown’s damage has already been done, with weeks of halted operations and growing backlogs that will take months to unwind once funding is officially restored. Taxpayers and businesses are watching Washington closely, waiting for the gears of government to start turning again.
Here’s where things stand:
IRS Workforce and Operations
For the past month, about half of the IRS’s 74,000 employees have been furloughed. The remaining half has focused on keeping core systems running—maintaining e-filing systems, safeguarding taxpayer data, and managing critical IT functions. As furloughed employees return, they face a massive backlog of unopened mail, unprocessed returns, and taxpayer inquiries.
Routine correspondence, inquiries, and compliance work will only begin to resume slowly, and the growing backlog means full normalcy is still weeks—if not months—away.
Taxpayer-facing services have been hit hardest, with many communication channels still suspended or automated. For individuals and businesses, this means continued delays and uncertainty in resolving disputes, notices, or pending issues. And with the shutdown still in effect, the backlog continues to grow each day.
Even during the shutdown, it has been possible to reach a live representative when calling the IRS customer service lines to check your status, answer inquiries, or resolve basic issues. We managed to reinstate a client’s passport and had a penalty abatement request granted with the help of a call-in representative.
The IRS Income Verification Express Service (IVES)—which allows taxpayers to authorize mortgage lenders, banks, and others to request tax return or wage transcripts for income verification—also remains open and available.
Other services will soon begin to come back online. The IRS had paused issuing new Employer Identification Numbers (EINs) and processing applications for tax-exempt status or pension plans, but those functions will gradually resume as staff return. Paper correspondence remains significantly delayed, so taxpayers should continue to avoid sending important documents or payments by mail. For now, electronic payments and online submissions remain the most reliable and secure way to interact with the IRS.
What’s Still Working
Not everything is on pause. Electronic systems remain up and running:
- E-filing and electronic payments: Returns and payments can still be submitted and processed automatically. Do not mail in a paper payment and expect timely results.
- Direct deposit refunds: Certain straightforward, error-free 1040s continue moving through the system.
- Critical IT maintenance: A small group of employees continues testing and securing core systems to support future filing operations.
Tax Deadlines and Compliance Obligations
The shutdown offers no reprieve for late filers. Tax filing and payment due dates continue as usual, with interest and penalties accruing on any late submissions.
- Filing deadlines: The October 15 deadline for extended 2024 filings was not extended. If you still haven’t submitted your return, you remain liable for late filing.
- Penalties and interest: Continue to accrue on late filings or payments.
- Compliance expectations: Taxpayers must meet obligations even though IRS assistance is limited.
In short, the IRS may be running slowly, but your due dates are not.
Refunds and Backlogs
Refunds are another pain point.
If you’re waiting for a payout, expect delays. The IRS has paused most refund issuances during the shutdown, with the exception of straightforward, electronically filed Form 1040 returns that are error-free and include direct-deposit information.
Some taxpayers may receive their refunds without interruption, but others—especially those with paper filings, credits like the Employee Retention Credit (ERC), or more complex cases—will likely have to wait until full operations resume.
Business and Professional Impact
A broader effect of the shutdown is its impact on IRS guidance for evolving tax laws. Tax professionals and businesses are still waiting for clarification on key provisions of the “One Big Beautiful Bill (OBBB).” Most federal agencies responsible for implementing the OBBB remain on hold. Only essential or independently funded activities continue, leaving guideline and regulatory development paused until funding fully resumes.
Updates remain stuck in draft mode, leaving firms and advisors to interpret complex rules without official direction. This uncertainty makes planning difficult—especially for companies dealing with new or changing tax provisions that require authoritative guidance.
Key challenges include:
- Stalled guidance: Policy updates and technical corrections are on hold, limiting the IRS’s ability to clarify new legislation.
- Planning paralysis: Without official interpretations, professionals must make assumptions that could later conflict with post-shutdown rulings.
- Heightened compliance risk: Businesses may proceed under outdated or incomplete rules, increasing exposure to penalties or audit findings later.
The shutdown doesn’t just pause operations—it pauses certainty, forcing taxpayers and professionals to move forward without authoritative information.
Enforcement and Compliance Activities
If there’s one area offering temporary relief, it’s slowed enforcement. Most manual audits (staff-led, interactive) and field collection actions are paused or delayed. As of this writing, the U.S. Tax Court has announced cancellations of in-person and remote trial sessions, though the clerk’s office remains open for e-filing and paper filing. Further decisions about future weeks are updated regularly on the Tax Court website. Check with your specific IRS agent, representative, or court for the latest status, since operations vary and fluctuate.
While this pause provides temporary relief for those under scrutiny, it isn’t a free pass. Once funding returns, enforcement will ramp up quickly to make up for lost time.
What Taxpayers and Businesses Should Do Now
While much of the IRS remains offline or slowly coming to life, compliance expectations haven’t changed. Experts recommend using this time to strengthen your position:
- File electronically to avoid mail delays.
- Make payments electronically, not by paper check.
- If you must submit anything by mail, make sure it’s trackable and retain mailing receipts.
- Document everything: Keep records of filings, payments, and correspondence.
- Review outstanding items: Prepare responses to notices, audits, or refund claims so you can move quickly when operations resume.
- Consult professionals: Tax advisors can help you prepare to meet compliance obligations once enforcement resumes.
Staying proactive now helps minimize headaches later and ensures readiness when the IRS returns to full capacity.
Looking Ahead
The full scope of the shutdown is still unfolding. The longer it continues, the more pronounced the backlog will become, and the longer it will take for the IRS to return to normal operations. Businesses and individuals should expect a slow, uneven recovery once funding is restored.
In the meantime, compliance remains mandatory. The best strategy is to stay current, stay organized, and stay patient. When the IRS does come back online, those who’ve used this downtime to prepare will be in a stronger position to move forward with confidence.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
