(And What That Means for You)
If Republicans and Democrats can’t agree on a bill to keep funding federal services, the U.S. government shuts down at midnight on October 1. That can happen any year, as Congress must approve all spending plans, and when one party can’t get enough required votes (60), the spending bill can’t pass.
No one can predict how long the 2025 shutdown will last, although as of October 23, it was the third-longest funding lapse in modern history. What does that mean for the IRS? Do you still have to pay taxes? The short answer is yes – during a government shutdown, a lot of the IRS’s automated processes remain active, including accepting e-filed returns, assessing penalties, and initiating certain collection actions such as wage garnishments.
The unfortunate reality? A shutdown creates an advantage for the IRS. Its computer systems are active, but taxpayers’ ability to challenge, resolve, or communicate is severely limited.
If you’re facing a tax problem, the shutdown doesn’t help you – to protect yourself, reach out to us at Wiggam Law today.
Key takeaways
- Essential IRS functions continue during government shutdowns.
- The IRS adds penalties and interest to late returns, even when shut down.
- The agency also continues with automated collection actions, including tax liens, bank levies, and wage garnishments.
Does the IRS shut down when the government shuts down?
Thousands of IRS employees are currently furloughed (sent home temporarily without pay), and many services are paused. But the Internal Revenue Service (IRS) isn’t like a regular business that simply closes up shop.
The vast majority of its functions, including those related to automated revenue collection, money movement, and legal deadlines set by the tax code, are essential. These functions are often deemed “excepted” from the shutdown, which means a skeleton staff continues to work and automated systems remain operational.
So even though services like taxpayer assistance aren’t easily accessible, the accrual of penalties and interest on unpaid balances continues, the clock keeps ticking on legal deadlines, and some enforcement actions may still proceed automatically.
A brief history of government shutdowns and IRS impact
Government shutdowns aren’t new, and the pattern of disruption at the IRS (and other government agencies) is well-established. During shutdowns, the Treasury Department (which oversees the IRS) implements its Contingency Plan for a Lapse in Appropriations. These plans dictate which employees are “essential” and must keep working and which are “non-essential” and are furloughed.
Previous key shutdowns that shook the IRS
- 1995-1996 (21 days): While revenue collection continued, a halt in processing paper tax returns and the inability to answer phone calls foreshadowed the service crises of the future.
- 2013 (16 days): Systems and forms preparation and testing were disrupted, creating confusion once the IRS reopened.
- 2018-2019 (35 days): This shutdown resulted in a backlog of millions of mail pieces and unresolved cases persisting for months, significantly delaying responses to taxpayers.
Modern shutdowns have seen the IRS lean heavily on new funding sources, such as the Inflation Reduction Act, for a limited time to maintain operations or rely on automated systems. However, once that temporary funding runs out, the agency typically will revert to its contingency plan, resulting in massive furloughs and the suspension of all direct taxpayer services.
In 2025, the IRS furloughed just under half of its workforce by October 8. The IRS Taxpayer Advocate Service offices have closed, and the Tax Court announced that it would have to cancel trial sessions if the shutdown continued. By October 17, 2025, funding ran out for federal courts, which include the U.S. Court of Federal Claims.
The backlog effect
All major shutdowns share a common theme: the inevitable buildup of massive backlogs. When funding lapses, the IRS typically furloughs about half of its workforce. Let’s put this picture into perspective.
In January 2025, the IRS had over 102,000 employees. The current administration directed the agency to cut its staff, and by mid-year, the IRS had slightly fewer than 76,000 employees, of whom about 38,000 had been furloughed due to the shutdown.
Even if the shutdown lasts only a few weeks, IRS employees will return to:
- Millions of pieces of unopened paper mail, including tax returns, correspondence, and responses to audits or notices.
- A massive queue of unanswered phone calls, with wait times skyrocketing once the lines open again for calls.
- Delayed manual case reviews, including audits, appeals, offers in compromise, and requests for tax transcripts that require a human to look at the paperwork.
The key takeaway from past precedent? Shutdowns reduce service but don’t cancel the IRS’s legal authority. They make it harder, slower, and more expensive for taxpayers once operations resume.
What IRS functions continue during a shutdown
When a shutdown happens, the IRS focuses on two primary areas: protecting federal revenue and maintaining critical infrastructure. In other words, many of the essential functions affecting your money keep running.
- E-filing and direct deposits
Electronic filing (e-filing) systems that accept electronically filed returns are still running. To avoid penalties, you must still file on time. - Electronic payments
The ability to pay taxes, estimated quarterly payments, or existing balances through your account on the IRS portal, the Electronic Federal Tax Payment System (EFTPS), or direct debit remains operational. - Direct deposit or refunds
If you’re expecting a refund and filed electronically, the process of issuing that refund via direct deposit typically continues without significant delay, since it’s an automated transaction. - Penalties and interest
The financial clock does not stop during a shutdown. The Internal Revenue Code bases penalties and interest on statutory deadlines, and the IRS’s automated system for calculating and applying these amounts remains active. - Wage garnishment and other automated enforcement actions
Can the IRS garnish wages during a shutdown? Yes. The IRS can garnish wages during a shutdown, specifically through its highly automated collection programs. The Automated Collection System can also file liens and send notices.
A small number of excepted employees, often including those who maintain core IT infrastructure and those working on time-sensitive criminal tax investigations, continue to work.
What IRS functions slow down or pause?
While the core of the financial machine keeps running, virtually all taxpayer-facing services requiring a human IRS employee are suspended. Enter maximum frustration and inconvenience for the average citizen.
Zero customer service and assistance — Customer service phone lines and dedicated toll-free numbers become largely inactive. Taxpayers calling for help, to set up a payment plan, or respond to a notice won’t be able to reach a live representative. Hold times will stretch forever, or the systems will disconnect. In-person Taxpayer Assistance Centers (TACs) are closed.
The paper pileup – Any process involving physically handling paper stops dead in its tracks. Paperfiled returns, responses to notices, applications for installment agreements, and documentation for audits sent via “snail mail” won’t be processed or reviewed. This pause is particularly problematic because if a deadline to respond to a notice passes while your response sits in an unopened envelope, the IRS system may automatically trigger the next, more aggressive step in the collection process.
Requests for transcripts, which are often needed to apply for loans or financial aid, are usually delayed significantly if they can’t be obtained online or require manual verification.
The case review and appeals process – The entire ecosystem for resolving tax disputes goes into hibernation. Most audit activities, including those requiring interaction between a taxpayer and their representative, are temporarily suspended. The IRS also doesn’t review offer in compromise applications or certain collection appeals, leaving taxpayers in limbo and potentially delaying the financial relief they need.
Why taxpayers should still take action during a government shutdown
Although many IRS services have shut down or slowed significantly, you don’t have a free pass to ignore your tax obligations (or wait them out).
The IRS has a dual role: collections and service. During a shutdown, the service role is gutted, but the collection component (the automated, relentless system of penalties and interest) keeps running.
Here’s why you shouldn’t ignore your tax bill, even if the government is shut down.
- Interest and penalties are increasing your debt.
- Filing and payment deadlines still apply.
- Automatic systems can (and will) still issue levies or offsets. If the IRS has already mailed you a Final Notice of Intent to Levy, that 30-day clock is running. If you fail to respond to the notice (which is difficult, since the phone lines aren’t working), the automated system may initiate a wage garnishment or bank levy as soon as the waiting period expires.
The post-shutdown stampede
Waiting until the IRS reopens is rarely a good strategy because of the backlog. When the shutdown ends, the IRS doesn’t immediately return to normal operations; it enters a triage phase.
The agency prioritizes time-sensitive tasks, which can lead to a surge in collection activities, including processing delayed levies and garnishments. The sheer volume of unopened mail and unreturned calls means that a problem that could’ve taken a few weeks to resolve before the shutdown might now take months.
How a tax professional can help you during a shutdown
Tax professionals can be invaluable during a government shutdown. Here’s how they help:
- Ensure time-sensitive filings are on time, avoiding penalties.
- Draft responses to IRS notices with clear paper trails to protect you from penalties.
- Monitor your account’s status, check for changes, transcript issues, or the impending release of automated notices.
- Set up payment plans online or prepare currently not collectible applications.
- Contact the IRS if you’ve been levied or garnished, using special procedures to document the situation, paving the way for a swift removal of the levy once the shutdown ends.
- Protect your rights to an appeal or hearing that the shutdown might otherwise compromise.
What should you do during the government shutdown?
The smartest move you can make is to use the shutdown period (like the quiet before the storm) to get organized. A tax professional can help you by advising which documents you need for a tax issue (audit, OIC, appeal) so you’re ready to file as soon as the IRS fully opens. They can build the entire resolution strategy, preparing all the necessary forms so your case goes to the front of the line, ready for electronic or manual submission, beating the rush of other taxpayers.
| Misconception | Reality |
|---|---|
| “The IRS is closed, so I can ignore notices or deadlines.” | False. The deadline clock, interest, and penalties are set by law and not paused by a shutdown. Ignoring a notice, even if you can’t call, means the IRS system will automatically move to the next enforcement step. |
| “They can’t garnish wages or seize property during a shutdown.” | Partly false. While manual, in-person seizure activity generally stops, automated processes like the Federal Payment Levy Program and other automated offsets continue. If the system has already issued its final warning, a levy can proceed. |
| “It’s better to wait until everything reopens to get help.” | False. Waiting guarantees you’ll face higher penalties, more accrued interest, and a much longer resolution time. Your case will be stuck in the massive backlog created by the shutdown. |
| “I’m safe if I’m waiting for a refund.” | Not entirely. While most e-filed refunds go through, any refund that requires manual review, identity verification, or involves a paper return will be delayed indefinitely, sometimes for months. |
The key takeaway? Enforcement doesn’t always require active IRS employee involvement. The collection computer systems run 24/7 and follow rigid tax code rules, regardless of whether the government is functioning or not.
Next steps: Don’t wait for the IRS to reopen
Taxpayers experiencing issues with their taxes should use it for action, not procrastinate. Your tax liabilities are a legal obligation that operates outside the government’s operational budget. To safeguard your financial health and avoid compounding tax issues, follow these steps:
- Meet all deadlines: For filing returns and making payments.
- Act on all notices: If you receive an IRS notice, read it immediately. Don’t ignore it, even if you can’t call the IRS. The clock is ticking.
- Schedule a consultation: If you have tax problems (unpaid taxes, unfiled returns, collection actions, etc), contact a tax attorney today. Use the shutdown as a window to organize your case, gather your documents, and prepare your resolution strategy before the agency reopens and the lines jam.
Government Shutdown FAQs
If the government has shut down, is the IRS shut down, too?
When the U.S. government shuts down, the IRS will furlough part of its workforce. Most taxpayer services (phone support, paper processing, and audits) are suspended. Essential functions like e-filing, electronic payments, and accrual of penalties and interest continue.
Will penalties and interest still accrue while the IRS is closed?
Yes, absolutely. Statutes (laws) govern interest and penalties, not IRS staffing levels. Each day a tax debt remains unpaid, interest will accrue and compound, often daily.
Can the IRS still garnish wages or seize assets during a government shutdown?
Yes, some enforcement will continue. The IRS has sophisticated, automated collection programs, such as the Federal Payment Levy Program (FPLP), which is administered by the Treasury Department. If the IRS already sent a final notice of intent to levy before the shutdown began, that notice’s deadline remains valid. The automated system may proceed with wage garnishments, bank levies, or seizing federal payments. Manual seizure actions, however, are typically on hold.
Will my tax refund be delayed during a government shutdown?
If you filed electronically and chose direct deposit, your refund is generally not delayed because the process is highly automated and considered essential. However, if you filed a paper return or your return requires manual review, identity verification, or an audit, your refund will be significantly delayed.
Can I still get help from a tax professional during a government shutdown?
Yes, and you should. A tax attorney can help you resolve your tax problems and advise you of what to expect during the shutdown.
Should I wait to respond to the IRS if no one answers the phone?
No. Don’t wait. The notice is legally valid, and the response deadline remains in effect. Even if you can’t reach a person by phone, you must take action. Consult a tax professional immediately or draft a detailed, timely response and send it via certified mail to document that you met the deadline, even if the mail is delayed at the IRS.
Get Help Now
At Wiggam Law, we’ve helped clients deal with countless tax problems – both while the IRS is fully operational and while it’s shut down. To protect yourself and your assets, you need to face your tax problems head-on, and we can help. Contact us today for a consultation or call us at (404) 233-9800.
