When a federal government shutdown begins, government operations grind to a crawl, and taxpayers feel the impact first. The IRS furloughs employees, stalls relief programs, and leaves millions of federal workers in limbo. As congressional leaders debate a funding bill, critical government services are facing delays or potential suspension nationwide.
When the federal government shuts down due to a funding lapse, the Internal Revenue Service is among the agencies most severely affected. Under federal law, roughly 85 to 90 percent of IRS employees are furloughed, leaving only a small portion of the federal workforce to maintain essential services.
During a shutdown, the Taxpayer Advocate Service shuts down completely, cutting off a critical avenue for resolving disputes. The IRS stops processing applications for installment agreements, offers in compromise, and penalty abatement requests. It continues handling some tax returns and refund claims in a limited capacity, but delays most taxpayer relief until normal operations resume.
The effects extend beyond the IRS. Federal government shutdowns ripple across agencies from the Social Security Administration to the Small Business Administration, cutting off timely relief for government workers and small business owners. They stall Federal Housing Administration loans, delay student aid, and halt benefit verification for Veterans Affairs.
National parks and post offices remain open at reduced levels. Still, services such as the Supplemental Nutrition Assistance Program and the Special Supplemental Nutrition Program for Women, Infants, and Children risk interruptions during a prolonged shutdown. Air traffic controllers and border protection staff are required to remain on the job without pay until a continuing resolution or funding bill is signed.
According to the Congressional Budget Office, the last shutdown resulted in a significant reduction in economic growth, with billions lost permanently. For taxpayers waiting on disaster relief or penalty relief, the consequences of another shutdown could be especially severe.
Since the late 1970s, the United States has experienced more than a dozen federal government shutdowns, often triggered by disagreements between Congress and the executive branch over funding bills. These shutdowns have ranged from brief pauses lasting only a few hours to prolonged shutdowns that lasted for weeks, disrupting government services nationwide.
In October 2013, a 16-day shutdown furloughed nearly 90 percent of IRS employees. Military families, federal workers, and small business owners were left waiting for tax relief as cases continued to pile up. Veterans' benefits and benefit verification requests were delayed, while housing assistance tied to federal agencies slowed to a crawl.
The longest shutdown in U.S. history began in late December 2018, during the Trump administration, and lasted 35 days. Driven by disputes between congressional leaders, House Republicans, and Senate Democrats over a continuing resolution and border protection funding, the shutdown had far-reaching effects. Disaster relief applications stalled, Small Business Administration loans were frozen, and furloughed federal workers missed multiple paychecks.
The Congressional Budget Office reported that the 2018–2019 shutdown resulted in approximately $3 billion in permanent lost economic growth. Beyond the fiscal year losses, the shutdown reduced efficiency across federal agencies, delayed tax returns, and eroded public confidence in the federal government’s ability to remain open during periods of political brinkmanship.
The IRS has made clear that its relief programs cannot operate without funding. “If there is a lapse in appropriations, the Taxpayer Advocate Service will not be permitted to assist taxpayers until the government reopens,” the agency states on IRS.gov. This means that taxpayers facing urgent financial hardship will have no direct channel for assistance during a shutdown.
The Tax Foundation has warned that shutdowns undermine public confidence in the tax system and cause taxpayers to lose faith in government services. Analysts note that delays in processing tax returns, combined with the lack of penalty relief, can reduce efficiency and erode compliance over time.
The Bipartisan Policy Center has argued that taxpayer hardship programs should be classified as essential services during any funding lapse. “Shutdowns create lasting inefficiencies that extend well beyond their official end,” the center said in a recent report, urging Congress to act.
Congressional leaders remain divided over how to fund the government. House Republicans and Senate Democrats have clashed over stopgap bills, border protection funding, and provisions of the Inflation Reduction Act. As the midnight deadline for a new funding bill approaches, the risk of another prolonged shutdown remains high.
Taxpayers who anticipate filing for relief should submit applications early. Filing installment agreement requests, offers in compromise, or disaster relief claims before a funding lapse can prevent cases from being stalled. Keeping IRS payments automated ensures agreements remain active even when IRS employees are furloughed.
Those already in payment plans should continue making scheduled payments. Taxpayers experiencing hardship should carefully document financial strain, since penalty abatement requests often require proof. Avoid making financial decisions that depend on government services being processed quickly, as a prolonged shutdown can extend delays far beyond initial expectations.
When government services resume, taxpayers should follow up immediately on pending applications. Requests for penalty relief tied to the shutdown period may be considered once IRS employees return to work. Small business owners and low-income taxpayers are encouraged to consult with tax professionals, who can help navigate backlogs and ensure eligibility for relief programs.
IRS.gov provides official updates on taxpayer relief programs, filing deadlines, and disaster assistance during periods of government funding lapse. Congress.gov offers legislative records and current details on appropriations, continuing resolutions, and federal government shutdown proceedings. Together, these resources give taxpayers reliable information on both policy and procedure.
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