IRS Furloughs Thousands

As the federal government shutdown continues, the Internal Revenue Service (IRS) has furloughed nearly half of its workforce, significantly disrupting tax administration just days before the critical October 15 filing deadline. The shutdown, which stems from a lapse in congressional appropriations, has left approximately 34,000 IRS employees, roughly 46% of the agency’s staff, on furlough. The remaining 54% are working under “excepted” status to manage essential operations such as revenue collection, system maintenance, and limited enforcement functions.

For taxpayers, especially those who requested an automatic six-month extension to file their 2024 tax returns, the timing could not be worse. The IRS’s reduced capacity means processing delays, slower correspondence, and limited taxpayer assistance are virtually guaranteed. Yet, despite the agency’s reduced operations, filing and payment deadlines remain in-force and legally binding.

The Impact of the Shutdown on IRS Operations

According to reports from Reuters, the Associated Press, and other reliable news outlets, most routine IRS functions are suspended during the shutdown. This includes paper return processing, correspondence responses, phone support, and the issuance of certain taxpayer notices and rulings. Only a fraction of the IRS workforce will continue working to safeguard government property, protect revenue, and maintain the basic functioning of electronic filing systems.

The furloughs also mean taxpayers will encounter significant challenges when trying to reach the IRS for assistance. Call centers and taxpayer advocate services are either closed or severely limited. Tax professionals attempting to obtain transcripts, verify identity information, or resolve account discrepancies will likely face long delays. Refunds may also be delayed, especially for those who file closer to the October 15 deadline or submit paper returns.

However, it is important to emphasize the electronic filing and payment systems remain operational. Taxpayers can still file returns electronically through commercial software or authorized tax preparers, and payments can be made online at IRS.gov, as these automated systems are maintained by the small group of “excepted” employees  who are tasked to ensure the continuity of core operations.

The October 15 Filing Deadline Still Applies

The most immediate concern for millions of taxpayers is the October 15 deadline for extended individual returns still applies, even during the shutdown. The federal tax code and Treasury regulations do not suspend statutory filing or payment deadlines due to government shutdowns.

In other words, the IRS may be operating with half its staff, but taxpayers are still fully responsible for filing on time. Those who fail to do so may face penalties and interest unless they can later demonstrate “reasonable cause” for the delay.

For individuals who filed an extension, this is the final opportunity to submit their 2024 Form 1040. The safest and most efficient option is to file electronically and use direct deposit or electronic payment to settle any balance due. Taxpayers who rely on paper returns or mail-in payments risk significant processing delays, which may lead to confusion, duplicate notices, or even later penalty assessments.

What Taxpayers Should Expect and Do

Given the IRS’s limited capacity, taxpayers should take several steps to proactively ensure compliance and minimize frustration during the shutdown period:

1. File electronically whenever possible. E-filing is the most reliable way to submit returns and receive acknowledgment. Paper returns will likely sit unopened until the government reopens.
2. Pay electronically. Taxpayers owing money should use the IRS Direct Pay system or the Electronic Federal Tax Payment System (EFTPS), as payments made through these channels are credited immediately.
3. Do not expect timely responses. If you have written to the IRS or are awaiting correspondence, expect long delays. Responses may take weeks or even months once operations resume.
4. Keep documentation. If you experience filing or payment delays due to IRS disruptions, document your efforts. Records of submission attempts, receipts, or technical issues may help establish reasonable cause for future penalty relief.
5. Monitor IRS announcements. When the shutdown ends, the IRS will issue guidance regarding catch-up operations and any administrative relief that may apply.

Long-Term Concerns | IRS Furloughs Thousands

The furloughs also raise long-term concerns for tax administration. As the IRS is still working on significant processing delays from prior years, the loss of nearly half its staff, even temporarily, will further slow operations and create additional backlogs for the IRS to manage.

Tax professionals warn that delays in issuing refunds, processing amended returns, and handling audit correspondence could persist well after the government reopens. Additionally, rulings, determinations, and guidance related to new tax laws will likely be postponed, leaving businesses and individuals uncertain about compliance.

While the Government Employee Fair Treatment Act ensures back pay for furloughed workers once funding resumes, morale and operational momentum within the agency are likely to suffer. The IRS has been working to modernize its systems and rebuild taxpayer trust following years of underfunding and pandemic-related strain and a prolonged shutdown threatens to erode that progress.

Bottom Line | IRS Furloughs Thousands

For taxpayers, the government shutdown is not a reason to delay filing or payment. The IRS may be slowed, but the law remains in full effect. Those facing the October 15 deadline should file electronically, make payments online, and maintain records of compliance efforts.

Even though the IRS is partially closed, taxpayers are not off the hook. Staying proactive, organized, and compliant will help avoid penalties—and ensure a smoother resolution once the government reopens and the IRS resumes full operations.

RJS LAW

RJS LAW and its experienced attorneys provide tax planning (domestic and international), audit representation, and other tax related services to individuals and for businesses across a wide spectrum of industries.   We provide representation before the IRS and other taxing agencies such as the CDTFA, Franchise Tax Board, and EDD.  For a free consultation, please contact us at RJS LAW or by telephone at 619-595-1655.