Millions of taxpayers face uncertainty as Congress approaches another deadline to fund the federal government. If lawmakers fail to reach an agreement and a government shutdown begins, refunds could be delayed. While the Internal Revenue Service will maintain some essential services, refund processing and taxpayer assistance often cease until funding is resumed.
When the federal government experiences a funding lapse, federal agencies must suspend non-essential services. The Internal Revenue Service is one of the most heavily affected agencies due to its role in tax administration.
The IRS contingency plan allows certain essential functions to keep operating. Electronic tax return submissions are still accepted. Tax payments continue to be processed. Revenue collection and basic system security also remain active during the first five business days of a shutdown.
Refund processing, taxpayer assistance phone lines, and in-person service centers are suspended during a shutdown. Social Security number verification and many paper-based filings, such as tax-exempt organization returns, are also delayed. Once funding resumes, the backlog can stretch for weeks.
“While the IRS will accept returns electronically, refunds will not be paid until normal government operations resume,” the agency states in its official IRS shutdown plan.
Past Shutdowns Show Refund Delays and Backlogs
Taxpayers have already experienced the disruption caused by previous shutdowns. The IRS has historically struggled to maintain its operations when funding lapses, leaving millions of taxpayers waiting for refunds and basic services.
The most extended shutdown in U.S. history lasted 35 days, from December 22, 2018, to January 25, 2019, during the Trump administration. According to the Congressional Budget Office, the lapse reduced economic output by $11 billion, with $3 billion of that amount being permanently lost.
The IRS recalled 26,000 employees to handle filing season duties, but more than 14,000 did not report for work because they were not receiving pay. As a result, refunds were delayed and taxpayer services collapsed.
A 16-day shutdown in October 2013 also created widespread problems. The Government Accountability Office reported that the IRS was unable to verify more than 1.2 million income and Social Security records. This backlog delayed mortgage approvals, loan processing, and routine tax filings for weeks.
Both episodes exhibit a consistent pattern: even after the government reopens, the IRS requires weeks or months to clear the backlog created during the shutdown.
As Congress debates funding for the new fiscal year, taxpayers face deadlines that could collide with a government shutdown. The most immediate concern is the October 15 deadline for millions who filed for a six-month extension on their 2024 tax return.
If a shutdown occurs near this date, processing extended tax filings could be stalled. Refunds from electronically filed returns may still be accepted into the system, but distribution would pause. Paper filings, including expatriate tax returns and tax-exempt organization returns, face the longest delays.
Families expecting to receive the Earned Income Tax Credit or Child Tax Credit could experience significant delays in receiving their refunds. Small businesses, which often rely on refunds for payroll or quarterly estimated payments, would also feel the strain.
The Treasury Inspector General has warned in past reports that delays often hit lower-income taxpayers the hardest, creating financial hardship that lingers long after funding resumes.
Lawmakers and IRS Officials Warn of Service Gaps
The IRS contingency plan makes clear that refund payments depend on congressional action. Without new funding, taxpayer services remain frozen until a continuing resolution or a full budget is passed.
“While the IRS will accept returns, refunds will not be paid until normal government operations resume,” the agency stated in its official contingency plan on IRS.gov.
Lawmakers on Capitol Hill have warned about the damage another shutdown could inflict. Senate Finance Committee Chair Ron Wyden said working families should not become collateral damage in budget disputes. “Families who rely on refunds to pay bills or buy groceries should not be caught in the middle of a shutdown,” he told Congress.
The White House faces pressure to reach an agreement on funding levels before the start of the new fiscal year. During the 2018–2019 shutdown, President Donald Trump clashed with the Senate over spending priorities, leaving many agencies unable to operate. The standoff highlighted how quickly a funding lapse can disrupt normal IRS operations.
The Bipartisan Policy Center has argued that prudent management requires agencies to prepare for shutdowns, but no plan can prevent lasting damage. The Tax Foundation has noted that refund delays suppress household spending, while GAO reports show backlogs can extend for weeks even after the shutdown ends.
Independent reviews from the Treasury Inspector General indicate that reduced staffing makes it more difficult for the agency to detect fraud, leaving both taxpayers and the tax code vulnerable until the government reopens.
How Taxpayers Can Prepare for a Shutdown
Taxpayers cannot control when the federal government shuts down, but they can take steps to reduce delays and protect their money. Filing season disruptions often last weeks, and refunds may be delayed until funding resumes.
The IRS encourages taxpayers to file returns electronically. E-filed tax return submissions move faster through the system and are less affected by furloughs. Choosing direct deposit over paper checks also helps refunds arrive more quickly once the shutdown ends.
Prudent management requires taxpayers to maintain thorough documentation of tax filings, accounts, and payments. During a funding lapse, accessing office records or contacting the IRS may be complex, as many employees are furloughed. Paper tax filings, expatriate tax returns, and tax-exempt organization returns face longer delays.
Advisors warn taxpayers not to rely on refunds for essential expenses. Reviewing withholding or estimated payments can help avoid financial hardship if refunds are delayed. In complex situations such as deferred resignation program filings, early retirements, or cross-border tax administration, contacting a tax professional is the safest course of action.
“Start talking to your advisor now if you are counting on a refund or have a tax deadline during a shutdown,” the National Taxpayer Advocate recommended in a recent notice.
Sources
Guidance on IRS shutdown procedures is available at IRS.gov, including official contingency planning documents. Legislative records from Congress.gov provide details on hearings and testimony regarding the impacts of government shutdowns. The Congressional Budget Office publishes additional analysis, the Government Accountability Office, the Bipartisan Policy Center, and the Tax Foundation.
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