WASHINGTON, D.C. – MAY 18: The facade of the Internal Revenue Service building is seen in Washington, D.C., on Sunday, May 18, 2025. (Photo by Wesley Lapointe/For The Washington Post via Getty Images)
The Washington Post via Getty Images
With a midnight deadline to fund the government approaching, it’s becoming more likely that we are headed for a shutdown in Washington. That normally means that the lights will turn off and most non-essential activities will stop. However, according to the 2026 Lapsed Appropriations Contingency Plan released by the IRS on September 29, 2025, there will be no changes to IRS operations for the first five days of a government shutdown, thanks to a reallocation of money from the Inflation Reduction Act (IRA).
What would happen after that? That’s still unclear. Here’s a look at what we do know.
Where Is The Initial Money Coming From ?
A shutdown typically means that federal agencies do not have the funding to continue to keep the lights on. However, the IRS plans to take money that was already allocated to the agency—IRA money—in order to stay open.
The Inflation Reduction Act was signed into law by President Biden on August 16, 2022. As part of the IRA, Congress allocated an additional $80 billion in funding to the IRS over a ten-year period. Most of this money was earmarked for enforcement, while other dollars focused on improving technology and customer service.
In 2023, Congress took a bite out of that funding. Shortly after that, the IRA tax enforcement budget was cut by $20 billion. The cuts were supposed to happen over two years, but in the end, the entire $20 billion was included in the first year, 2024. Eventually, Congress clawed back more than half of the funding ($41.8 billion), leaving the agency just $37.6 billion, which is expected to last through September 30, 2031.
(You can find a look at how the IRS has spent supplemental funding allocated by Congress as part of the Inflation Reduction Act of 2022 so far this year, here.)
IRS Lapse Plan—For Now
Since they’re being paid, can’t government workers just show up anyway? No—it’s prohibited by law.
The Anti-Deficiency Act, a series of laws dating back more than 100 years, is intended to prevent federal agencies from spending money that has not been authorized. It also bars federal agencies from accepting voluntary services—employees can’t work for free during a shutdown. The penalties for violating the Act are severe, so federal agencies generally provide a written contingency plan.
Those contingency plans are typically pretty detailed. However, the most recent IRS Lapsed Appropriations Contingency Plan is pretty thin. It’s five pages long—including the cover—and provides little detail beyond the overview, which notes, “The IRS Lapse in Appropriations Contingency Plan describes actions and activities for the first five (5) business days following a lapse in appropriations. The plan is updated annually in accordance with guidance from the Office of Management and Budget (OMB) and the Department of Treasury. While we do not anticipate using the plan, prudent management requires that agencies prepare for this contingency.”
IRS Filing Deadlines Will Not Budge
Historically, filing deadlines have not been adjusted during a shutdown, and this is not expected to change. Taxpayers who have filed with a valid extension for the 2024 tax year still face a deadline of October 15, 2025.
Similarly, any payments or collection activities will not be moved—you should continue to make scheduled payments, including those that are part of installment agreements. Employers must also continue to deposit federal income tax withholdings, along with Social Security and Medicare taxes, according to the regular deposit schedule.
IRS Employees Impacted By The Shutdown
According to the agency’s shutdown plan, the total number of agency employees expected to be on board before the plan takes effect is 74,299. That’s a significant reduction from the 90,516 full-time equivalent (FTE) positions that were included in fiscal year 2024.
All of those employees would continue to perform their duties as usual for at least the first five days of any shutdown. After the initial five days, it is likely that IRS employees could be furloughed.
A Furlough Will Not Save Money
Some taxpayers believe that a government shutdown will save tax dollars. That’s not true: While it’s true that federal employees who work during a shutdown are not paid during the shutdown, they are paid when the shutdown ends. That means employees will be paid for days they do not work—and the work will still need to be done.
What does that mean in practice? The December 22, 2018, shutdown lasted 35 days, the longest in history. By the time it ended, the IRS was weeks behind schedule in training and hiring new staff for the 2019 tax season. At the time, the National Taxpayer Advocate advised House officials that it would take “at least a year” for the IRS to return to normal operations.
When the lights came back on, the IRS had a backlog of 5 million unanswered pieces of mail. At the height of the shutdown, the IRS was receiving more than 700,000 pieces of mail per day. Since in-person taxpayer assistance centers, fax lines, and phone systems were closed, taxpayers and tax professionals were forced to send all requests—even routine requests—by U.S. Mail.
The IRS and the rest of the government turned the lights back on January 25, 2019. The agency was already underfunded when operations resumed—there were no additional hands on deck. If the IRS reassigned workers from other departments to process the mail at a rate of 20,000 more letters per day—meaning that they would be removed from other tasks—the agency assumed they would be able to tackle the mail backlog alone in 250 business days, or roughly, a full calendar year.
Not only does a shutdown not save money, it typically costs the government money. A Senate report found that over the last three shutdowns, federal workers were furloughed and unable to work for 54 days, costing taxpayers nearly $4 billion—at least $3.7 billion in back pay to furloughed federal workers, and at least $338 million in other costs associated with the shutdowns, including extra administrative work, lost revenue, and late fees on interest payments.
And it’s not just paydays that cost taxpayers. According to the Congressional Budget Office (CBO), the 2018 government shutdown reduced economic output by $11 billion over the following two quarters, including $3 billion that the economy never recovered. Before that, Moody’s Analytics estimated that the 2013 government shutdown reduced GDP growth by $20 billion.
Government Employee Response
The National Treasury Employees Union (NTEU), the labor union representing 150,000 employees of 31 departments and agencies of the United States government, including the IRS, is urging Congress to reach a compromise.
“It may feel routine to some in Washington, but I can assure you that frontline federal employees outside the Beltway across all 50 states will never grow accustomed to the fact that Congress pushes government funding deadlines to the brink,” NTEU National President Doreen Greenwald said. “The political stalemates behind this now-annual spectacle cause real anxiety as thousands of federal employee families grapple with shaky personal finances and taxpayers are deprived of important services their government is supposed to provide.”
“The uncertainty itself is enough to create real tension in the workplace as employees await management decisions about who would keep working without pay, and who would be sent home, also without pay,” Greenwald said. “And work hours that should be focused on agency missions are now consumed by shutdown procedures. We all know shutdowns are wasteful, but so are the days leading up to them.”
There’s even more uncertainty this year: President Trump has threatened to use a shutdown to make permanent cuts to the federal workforce.
The Last IRS Shutdown
Assuming that cuts won’t happen during the shutdown, what could a shutdown look like at the agency?
During the last shutdown, approximately two-thirds of IRS employees—59,981 of the total 89,944 staff—were furloughed. That meant at that approximately one-third of IRS employees, or 30,063, continued to perform services. About half of those were paid for outside of appropriations.
The remaining 15,321 non-furloughed employees were those performing shutdown duties, as well as those necessary to perform activities necessarily implied by law and “to protect life and property.”
Who else stayed on the job? At the time, then-acting IRS Commissioner Daniel Werfel. The Commissioner is a presidential appointee who is exempt from furlough, which means his salary is paid regardless of the number of hours he works, so he cannot be placed in a non-duty, non-pay status. (Currently, there is currently no IRS Commissioner. Following the departure of former IRS Commissioner Billy Long, Secretary of the Treasury Scott Bessent has also been acting as IRS Commissioner.)
A handful of Deputy Commissioners and Chiefs of Staff also remained on staff or on call as needed.
What’s Next
Earlier this month, the House of Representatives approved a Republican-led bill that would fund the government for an additional seven weeks. The bill requires 60 votes to move forward in the Senate, which means that at least seven Democrats must join all 53 Republicans to vote yes. In exchange for their votes, Democrats are insisting that Republicans extend health care subsidies and reverse earlier cuts to Medicaid.
The most recent vote on the House bill in the Senate was 55-45 with Sen. Rand Paul (R-Ky.) siding with the Democrats to vote no and Sens. Cortez Masto (D-Nev.), John Fetterman (D-Pa.), and Angus King (I-Maine), siding with the Republicans to vote yes. After the failure to pick up the needed votes, Sen. Majority Leader John Thune (R-S.D.) said that the Senate would not vote again until Wednesday morning.
Just before 8 p.m. ET, the Office of Management and Budget issued a memo, which was posted on X (formerly Twitter), advising agencies to begin shutting down non-essential functions.
Check back with the Forbes tax team for updates as they become available.