How will a government shutdown affect tax returns?

Summary: 

Would a government shutdown affect my tax return? 

A tax return is filed with the Internal Revenue Service (IRS) and is a form (or forms) that reports income, expenses, and other relevant tax information. Your tax return is an opportunity to calculate your tax liability, plan tax payments, and request refunds for taxes you overpaid. In the US, individuals and businesses with reportable income such as capital gains, dividends, interest, other profits, and wages must file tax returns with the IRS or with the local or state tax collection agency. 

A partial or total government shutdown, such as the partial shutdown from December 22, 2018, to January 25, 2019, can disrupt the service of federal agencies. Considering these events are possible, the question is how a government shutdown will affect tax returns.  

As we saw in the last partial shutdown, the IRS did not stop working completely. Like several other federal agencies, the IRS never stops working during a shutdown, even if some employees are furloughed or some services are delayed or interrupted. 

We’re here to give you a better idea of what to expect if there’s an IRS shutdown in 2023 and how you can overcome some of the challenges that you could encounter. 

How could a government shutdown affect the IRS?  

One of the first questions that tax-conscious Americans ask in the event of a government shutdown is, “Is the IRS shutdown?” Whether the government shuts down partially or totally, the IRS will continue to work in a limited way, so the shutdown will not affect your tax return or your tax refund. 

The impact of an IRS shutdown is uncertain – and it’s not impossible you could find yourself facing this situation. The National Treasury Employees Union (NTEU) confirmed that the IRS could close in the event of a shutdown and that the full impact of this happening is yet unknown. Some potential effects include: 

What are the ongoing concerns about IRS tax? 

As the full extent of how a government shutdown will affect tax returns with regard to processing, refunds, and related matters is unknown, uncertainty is the greatest concern for many Americans.  

Some of the biggest ongoing concerns include: 

Does the IRS have a contingency plan? 

Given the possibility of a government shutdown, the IRS released a Fiscal Year 2024 Lapsed Appropriations Contingency Plan in September 2023.  

According to the contingency plan for a possible IRS shutdown in 2023, 33.4% of IRS employees will be designated as excepted/exempt and will be retained during the non-filing season from October through December 2023. The IRS will also continue implementing green energy credit provisions, as well as activities linked to implementing the direct file pilot program and the IRS IRA strategic operating plan. 

How could this government shutdown affect you? 

Despite the IRS continuing with some operations during the event of a government shutdown, the situation still could affect you in various ways. Let’s take a closer look: 

What can you do to combat it? 

Even in the event of a government shutdown, you should continue to fulfill your tax obligations by the deadline.  

However, there are several ways you could combat some of the potential issues that arise during a shutdown: 

How can I better manage my taxes? 

The uncertainty of how a government shutdown will affect tax returns can be unsettling. Rest assured, however, that the IRS will continue to function on a limited basis until the end of the shutdown period. If there is a shutdown, you should continue to file your tax return as normal, although you may need to wait for further processing, responses to queries, or a refund. 

You can better manage your taxes with the guidance and help of an SEC-regulated financial advisor. Let Unbiased find an advisor you can trust to help you navigate your way through income tax as well as all things IRS-related. Get matched with an advisor here.