Government Shutdown

As of 12:01AM, October 1, 2025, the federal government has shutdown due to a lapse in appropriations and inability to pass the funding bill. So, what does the government shutdown mean for taxpayers, businesses, and tax professionals navigating ongoing controversies and enforcement matters?

1. What a Shutdown Is (and What it Is Not)

A government shutdown occurs when Congress fails to enact appropriations legislation (or a continuing resolution) before the start of the fiscal year, thereby triggering a lapse in appropriations. Under such a lapse, federal agencies must curtail operations deemed “nonessential” or discretionary, while essential and mandatory spending programs generally continue.

While the headlines often focus on federal workers or political battles, many taxpayers are asking: What does this mean for me?

The short answer is that taxes do not stop because of a shutdown. The government does not entirely turn off. The IRS has prepared and enacted a contingency plan to smooth operations during the initial days of the shutdown, well, at least through October 7^th. This includes tapping into multi-year funds (such as those available from the Inflation Reduction Act) to maintain staffing and continuity.

 You still have to file returns, make payments, and follow deadlines. But how the IRS and other tax agencies handle those filings — and how quickly they respond to you — will likely change the longer this shutdown lasts.

Here is what individuals, businesses, and tax professionals should know.

1. Impact on Individual Taxpayers

Deadlines Still Apply
Even during a shutdown, tax laws remain in effect. Filing deadlines and payment due dates are not extended. If you owe money, you still need to pay. If you are on extension, your October deadlines still stand.

Refunds May Be Delayed
However, if you are expecting a refund, be prepared to wait. The IRS is using limited funds to keep operating for now, but if the shutdown drags on, non-essential services such as processing refunds and answering calls could slow down.

Limited Customer Service
IRS phone lines and walk-in centers may be closed or severely understaffed. Taxpayers with questions will likely find it harder to get live help. The Taxpayer Advocate Service — which often steps in to help when people are stuck — is also expected to be closed.

Collections Continue
It is crucial to know that IRS collection activity do not stop. If you are already under levy, garnishment, or lien, those actions continue during a shutdown. The IRS will also keep certain staff working to protect the government’s interests when deadlines are about to expire.

2. Businesses and Employers

Payroll Tax Deposits Do Not Stop
If you have employees, you must continue withholding and depositing payroll taxes as usual. A government shutdown does not excuse or extend these obligations, and penalties will still be applied for missed deposits.

Estimated Payments Still Due
Individuals and businesses making quarterly estimated payments must still pay on time. The IRS may take longer to process your payment, but the responsibility remains with you.

Potential Delays for Other Filings
Requests for determination letters for retirement plans and/or certain compliance submissions may stall. The IRS’s Employee Plans division and other specialized offices will likely be short-staffed.

State Agencies Still Open
California agencies like the Franchise Tax Board (FTB), Employment Development Department (EDD), and California Department of Tax and Fee Administration (CDTFA) are not affected by the federal shutdown. If you have audits, disputes, or deadlines with those agencies, nothing changes.

3. Tax Professionals and Pending Cases

Audits and Appeals
IRS audits, appeals, and other casework may be delayed if the shutdown continues. Cases where statutes of limitation are about to run out may move forward, but others will likely stall.

Court Cases
Some tax court and federal court matters will proceed temporarily, but a long shutdown could lead to postponed hearings and rescheduled trials.

Communication Breakdowns
If your attorney or CPA is waiting for an IRS response, they may not get one until after the shutdown ends. This can be frustrating, but it is a systemic issue, not inaction on your representative’s part.

4. What You Should Do Now

• File and Pay on Time – Do not assume a shutdown buys you more time.
• Expect Delays – Refunds, audits, and appeals may move more slowly.
• Be Proactive – If you have a case pending, talk with your tax professional about protective steps in case deadlines are impacted.
• Manage Expectations – Understand that IRS responsiveness will likely be limited until funding is restored.

5. Looking Ahead – Government Shutdown

The IRS currently has contingency funds to keep operating at close to normal levels for a short period, but if the shutdown continues, nonessential functions will scale back. The longer it lasts, the bigger the backlog. After prior shutdowns, it took months for the IRS to catch up on correspondence and casework.

This shutdown also comes at a busy time with fall filing deadlines coming up for extended returns, as well as businesses preparing for year-end payroll, and tax professionals gearing up for the 2026 filing season under the new One Big Beautiful Bill requirements. Disruptions now could create ripple effects well into next year.

For taxpayers, a government shutdown does not mean tax obligations disappear. Deadlines remain, payments are due, and compliance is still expected. What changes is the government’s ability to respond, process, and resolve matters on time.

Even in a shutdown, the best protection is staying compliant and proactive.

Get Help from Experienced Professionals | Government Shutdown

If you are concerned about a pending IRS issue — or want to avoid penalties while things are uncertain — now is the time to act. RJS law is closely monitoring developments and helping clients plan around delays.

RJS LAW and its experienced attorneys provide tax planning (domestic and international), audit representation, and other tax related services to individuals and 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. 

Written by Judith G. Jeremie, JD