The Internal Revenue Service (IRS) has begun furloughing nearly half of its employees amid the ongoing government shutdown, which began on October 1, 2025. According to the agency’s updated contingency plan, more than 34,400 of its 74,300 workers were placed on unpaid leave as of October 8, disrupting key operations and creating uncertainty for both employees and taxpayers.
Initially, the IRS expected to continue operations uninterrupted, citing available funds from the 2022 Inflation Reduction Act (IRA). However, that funding only covered the agency’s first five business days of the shutdown. With no end in sight to the funding impasse between President Donald Trump and Congress, the agency has shifted to a reduced operational model.
Confusion Among Employees
Reports from union officials describe a chaotic rollout of the furloughs. In Kansas City, Shannon Ellis, president of the local National Treasury Employees Union (NTEU) chapter, said employees received mixed messages.
An automated emergency system sent out a recorded message informing staff they were “considered furloughed” effective October 8 unless otherwise notified. Soon after, managers began calling employees instructing them to “ignore that message” and continue working. By late afternoon, many workers still did not know whether they were to report for duty or stay home.
In Memphis, which has one of the IRS’s largest workforces with roughly 4,500 employees, local NTEU president Gibson Jones said that the “vast majority” of staff were sent home, leaving only “very limited skeleton crews” in place.
Impact on IRS Operations
The agency’s updated Lapse Appropriations Contingency Plan, effective through April 30, 2026, identifies which functions will continue during the shutdown.
Approximately 39,870 employees (54% of the workforce) are expected to remain on duty, funded by “resources other than annual appropriations,” according to the plan.
Essential functions that will continue include:
- Tax return processing to protect government revenue
- Data protection and IT security systems
- Criminal investigations and enforcement
- Bankruptcy and lien case work
- Disaster-relief support
Operations that will be suspended include:
- Taxpayer assistance and call centers outside of filing season
- Non-automated collections and administrative services not tied to life or property protection
This reduction in service is expected to affect both taxpayers and accountants as the October 15 tax filing extension deadline approaches. Maria Ramos, NTEU president in Austin, Texas, warned that “tax returns will be arriving, but there will be no one there to process them.”
Changes from Previous Shutdowns
Union representatives noted that this shutdown has resulted in furloughs for employees who were previously considered essential. This includes workers responsible for opening and scanning mailed tax returns and payments — a critical part of paper-processing operations.
“The difference this time is that even essential paper-processing staff have been sent home,” said Ellis. “That was not the case in prior shutdowns.”
The Role of Inflation Reduction Act Funding
The Inflation Reduction Act initially provided roughly $80 billion to the IRS over ten years to modernize systems, improve customer service, expand enforcement, and hire additional personnel. However, congressional budget cuts have since reduced that allocation by nearly $42 billion.
The IRS initially planned to use IRA funds to pay its entire workforce through the shutdown. The updated plan now limits that funding to certain “exempt” positions, though union leaders say it remains unclear how long those funds will last.
Workload and Legislative Impact
The shutdown comes as the IRS is implementing numerous tax law changes under the One Big Beautiful Bill Act, some of which take effect this year. These include new compliance requirements and updated filing provisions for both individuals and businesses.
With fewer employees available to process returns, answer taxpayer questions, and apply these new provisions, accountants and tax professionals may face delays in correspondence, refund processing, and resolution of existing cases.
Outlook
The IRS has indicated that staffing levels could be revised again depending on funding developments, though the contingency plan currently extends through April 2026.
For now, critical functions tied to enforcement and data protection will continue, while many taxpayer services will remain suspended. Accountants and small businesses should expect delayed processing times and limited access to IRS support until Congress reaches a budget agreement.
Summary for Business Owners and Tax Professionals
- Furloughs: 34,400 employees furloughed; 39,870 retained.
- Coverage: Only essential operations continue; taxpayer services largely halted.
- Funding: Temporary reliance on Inflation Reduction Act funds.
- Impact: Processing and correspondence delays likely through October 15 and beyond.
- Next Steps: Tax professionals should prepare clients for potential delays in response times, refund processing, and transcript availability.
You Still Need to File Your Taxes
If you’re confused about the the government shutdown and its impact on your tax filing status, it’s best to work with a professional accounting firm like Morris and Associates. We can help you navigate the process and determine the best solution for your specific tax situation.
