Government Shutdown and Tax Refunds: What You Need to Know

When the federal government experiences a funding lapse, many taxpayers ask what it means for their tax return and tax refund. A government shutdown can affect certain government services and federal agencies, but refunds are usually still processed. Understanding how shutdowns impact government operations can help taxpayers plan and avoid unexpected consequences. 

Will My Tax Refund Be Delayed?

During a government shutdown and tax refund cycle, the Internal Revenue Service continues to provide essential services, such as electronic filing and direct deposit. Federal employees process e-filed tax returns, although mail delays can occur when government operations are reduced. Taxpayers can still file online, avoiding penalties, interest, and additional costs associated with delays.

Guidance stresses using electronic accounts. Taxpayers who owe may set up a payment plan or request an extension to resolve their obligations. IRS services note that the last shutdown began under the Trump administration, showing how a funding lapse impacts refunds. Once the government opens, refunds resume.

What Services Close During A Shutdown?

A government shutdown reduces government services provided by federal agencies. IRS phone lines, audits, and office visits close. Taxpayers relying on the mail face a delay. Non-essential operations pause, while mandatory spending programs, such as Social Security, Medicaid, and Medicare, continue. Air traffic controllers and border protection remain active.

Benefit verification and disease control at national institutes may pause, while national parks close. Air traffic control and power grid maintenance qualify as essential services. The Congressional Budget Office notes that a shutdown would harm the economy. Once government funding is restored, furloughed employees and services return.

Do I Still Need to File and Pay on Time?

Taxpayers must file and pay taxes even during a government shutdown. Federal government deadlines stay the same. IRS electronic services accept payments and scheduled accounts. Owed amounts must be resolved to avoid penalties and interest. Mail may slow when agencies reduce staffing.

Payment plans and installment agreements remain available online. A clean CR, or continuing resolution, may temporarily extend government funding, but filing dates remain unchanged. Tax professionals advise taxpayers to maintain sufficient funds in their accounts to cover bills. Once a spending bill becomes law, IRS operations stabilize.

How Long Do Shutdowns Last?

Previous shutdowns varied widely. Some lasted just one date, while others lasted weeks. The last shutdown under the Trump administration extended 35 business days. Shutdowns affect spending levels and funding levels agreed upon by Congress and the White House. Agencies experience significant costs during prolonged delays.

The Congressional Budget Office reports billions of dollars lost in revenue and government spending waste. The shutdown ends once lawmakers in the Senate and the House of Representatives pass a bill with the president's approval. A funding lapse continues until the government spending law is signed. Then the government will restore services.

Will Benefits And Paychecks Be Affected?

When a government shutdown began, many federal employees were furloughed. Some worked without pay, while others were unable to report. Federal employees in human services, health insurance, and Affordable Care Act programs faced disruption. Mandatory spending ensured Social Security, Medicaid, and in-hospital medical care continued despite the funding lapse.

Once a spending bill passes, furloughed employees receive paychecks and back pay. The Congressional Budget Office reported that the shutdown affects agencies’ costs by billions of dollars. When the government opens, non-essential programs and services resume.

What Should Taxpayers Do?

Taxpayers should file tax returns electronically during a government shutdown. Direct deposit speeds tax refunds, and IRS accounts help avoid penalties, interest, and delays. Mail slows as federal agencies reduce operations. Tax professionals advise online filing to save money and resolve tax debts owed quickly.

A payment plan or extension helps those who are unable to pay. Installment agreements keep accounts current. The taxpayer advocate and human services agencies provide guidance. Once government funding resumes through a spending bill, the IRS and government services stabilize, and agencies return to standard management.

Why Do Shutdowns Happen?

A government shutdown occurs when Congress fails to pass an appropriations or spending bill. Budget disputes and government spending delays halt agencies and IRS services. The White House and the president must sign the law before government operations resume.

Non-essential programs pause, while mandatory spending continues. A clean CR or continuing resolution may keep the government open temporarily. The Congressional Budget Office estimates the shutdown costs billions. Once the Senate, the upper chamber, and the president approve a bill, services are restored.

Sources

The Internal Revenue Service provides taxpayers with online filing, payment options, refund tracking, and account management tools at IRS.gov. Meanwhile, Congress.gov provides legislative information on government funding, appropriations bills, and congressional actions.