United States Capitol Building
The Internal Revenue Service furloughed approximately 34,000 of its 74,000 employees on October 8 as the government shutdown extended beyond the agency's initial contingency period, leaving tax practitioners to navigate this week's October 15 extension deadline with virtually no support from the agency.
The IRS had used leftover funding from the Inflation Reduction Act to keep operating during the first five days of the shutdown, but those funds ran out Tuesday. Furlough notices began going out to employees Wednesday morning, with nearly half the agency's workforce sent home in non-pay, non-duty status until further notice.
Deadline Remains Firm Despite Shutdown
Tax practitioners face a critical challenge this week: the October 15 deadline for individuals and businesses with extended 2024 tax returns remains in effect despite the shutdown. Clients must file on time to avoid penalties and interest, but practitioners will have no IRS support to resolve last-minute questions or issues.
The timing creates an impossible situation for many firms. Taxpayer services that answer questions are shut down. The Taxpayer Advocate Service, which helps resolve problems, has closed entirely due to a lack of funding. Non-automated collections and audits are suspended, and processing of transcripts, except for disaster relief cases, has stopped completely.
"Taxpayers around the country will now have a much harder time getting the assistance they need, just as they get ready to file their extension returns due next week," said Doreen Greenwald, president of the National Treasury Employees Union.
What's Still Working
The approximately 39,870 employees still working will focus on preparing for next year's filing season, including completion and testing of upcoming filing year programs and updating tax forms. The IRS will maintain automated revenue collection, minimal computer operations to prevent data loss, disaster relief transcript processing, and criminal enforcement operations.
But for practitioners dealing with client issues this week, these exempted activities offer little help. There's no one to call, no one to answer technical questions, and no way to resolve problems requiring IRS intervention.
Filing Season Looms Large
The shutdown creates ominous implications for the upcoming filing season. Unlike the 2018-2019 shutdown, when the IRS recalled workers from furlough to prepare for filing season, this shutdown takes a different approach, keeping nearly half the workforce furloughed while the remaining staff works on preparation.
The concern isn't just the immediate impact. Every day furloughed employees remain locked out creates another day of growing backlogs that will be waiting when operations resume. The IRS was already struggling with ongoing modernization efforts, implementation of new tax legislation, and lingering backlogs from previous years.
"Expect increased wait times, backlogs, and delays implementing tax law changes as the shutdown continues," Greenwald warned. "Every day these employees are locked out of work is another day of frustration for taxpayers and a growing backlog of work that sits and waits for the shutdown to end."
What Practitioners Should Do Now
Tax practitioners should prioritize filing all October 15 extensions immediately rather than waiting until the last minute. Document everything carefully, including filing dates and any issues encountered during the shutdown. Most importantly, communicate proactively with clients about the situation, setting realistic expectations about IRS delays and the likely complications ahead for the 2026 filing season.
The federal government has instructed agencies to adapt their plans as the shutdown progresses, making the situation fluid. Furloughed employees will receive back pay when the shutdown ends under a 2019 law, but when that will be remains uncertain. For now, tax practitioners must navigate the extension deadline and prepare for what promises to be an exceptionally challenging filing season ahead.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
Subscribe to the TPN Newsletter!
Like what you're reading?
Subscribe to our FREE newsletter and we'll deliver content like this directly to your inbox.