Will government shutdown delay tax return payments? What to know

As the U.S. government faces a potential shutdown, many taxpayers are concerned about how this might impact their tax returns and refunds. Understanding the implications can help in planning and mitigating any potential delays.

Why It Matters

This upcoming tax season, the IRS expects to handle a record number of returns, with over 140 million individual income tax returns anticipated. However, the federal government is on the brink of a shutdown, with funding set to lapse this Friday if a new spending bill isn’t approved. Historically, such shutdowns have led to significant disruptions in federal services.

Eric Bronnenkant, head of tax at Edelman Financial Engines, told Newsweek, “The IRS will likely be impacted significantly due to a government shutdown.”

What To Know

According to research from Edelman Financial Engines, 55 percent of Americans are “very concerned about the impact of a government shutdown.”

One of the most immediate concerns for taxpayers is the possibility of refund delays. During a government shutdown, the IRS typically operates with a significantly reduced workforce.

Taxpayers should expect disruptions if the shutdown lasts for an extended period. Essential functions, such as processing electronic returns and maintaining computer systems would continue but at a much slower pace. Kevin Thompson, founder and CEO of 9i Capital Group, told Newsweek “According to the IRS Lapse Appropriations Contingency Plan…about 44.5 percent of the IRS workforce (43,170 employees) would remain active” in the event of a government shutdown.

With a reduced workforce, the IRS may take longer to process returns. Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting told Newsweek a government shutdown during tax filing season would likely produce delays for tax returns needing extra scrutiny. That includes paper-filed returns, returns flagged for unusual activity by IRS systems, and returns claiming refundable credits like the Earned Income Tax Credit (EITC).

Another complication is the availability of IRS customer service. Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek service times could increase for people “needing further assistance or those that encounter an error with their return that needs to be corrected.” This could make it difficult for taxpayers with questions or issues to get direct support. Without IRS representatives available, those facing filing complications or errors may need to seek help from tax professionals or rely on online resources.

While electronic returns are less likely to be affected, experts still recommend taxpayers consider filing as early as possible to avoid delays.

What People Are Saying

Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “A potential government shutdown will have an effect on your tax returns depending on how you file and potential issues you could encounter with your return. Deadlines for filing remain the same, even if a shutdown lingers into April, and for most returns that are E-filed with direct deposit for refunds, the process should remain largely unchanged.

However, for those paper filing and needing further assistance or those that encounter an error with their return that needs to be corrected, times for service could go up substantially. While the IRS can continue to work during this time, it is normally a substantially smaller crew, and after recent layoffs to the service, the number of those who can assist taxpayers could dwindle considerably.”

Kevin Thompson, founder and CEO of 9i Capital Group, told Newsweek: “A government shutdown could create delays for taxpayers, especially for those filing paper returns. According to the IRS Lapse Appropriations Contingency Plan, during filing season, about 44.5% of the IRS workforce (43,170 employees) would remain active. So while the IRS wouldn’t completely shut down, it would be operating at less than half its normal capacity.

For e-filers and Free File users, systems should function normally—though expect minor delays. The bigger question is how current staffing cuts, especially with recent reductions under the Department of Government Efficiency (DOGE), have impacted the true size of the workforce. The original contingency plan was drafted under Biden, so it’s worth considering if those numbers are still accurate.

Bottom line: Taxpayers should expect some delays and not assume a smooth process—even without a shutdown. It’s best to file early and stay proactive.”

Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, told Newsweek: “Federal government departments are permitted to retain essential employees during a government shutdown. It is not clear what the IRS would consider to be essential employees. We have not had a government shutdown during tax filing season. Also, some employees may choose on their own not to work during a period when they are not timely being paid.

With a shutdown falling during tax filing season, it could have an impact on return processing and timing of refunds. It would be likely to have the greatest impact on returns requiring additional attention, such as paper filed returns, returns kicked out by IRS computers for review due to something unusual about the return, or returns claiming refundable credits such as the Earned Income Tax Credit, where there tends to be a greater amount review due to a greater potential for fraud.

To try to reduce the impact of any shutdown on their return processing and refund, taxpayers should consider filing electronically with direct deposit of any tax refund and carefully review the return so that there are not any errors that might result in the IRS computers kicking out the return for review.”

Eric Bronnenkant, head of tax at Edelman Financial Engines, told Newsweek: “The IRS will likely be impacted significantly due to a government shutdown. This is in addition to the impact of recent government layoffs.”

“A few Top Tax Tips to keep in mind: File as soon as you are ready, comfortable, and have all your documentation. If you need an extension, you can still choose to file one by April 15th. However, an extension to file is not an extension to pay. You will still need to pay what you expect to owe as part of the extension.

The IRS instructs that if taxpayers owe taxes, they should pay them before the due date to avoid potential penalties and interest on the amount owed. For this tax season because of a potential shutdown and the layoffs, be prepared for the IRS to take longer to do everything from processing returns and refunds to responding to taxpayer inquiries.”

Andy Phillips, vice president of The Tax Institute at H&R Block, told Newsweek: “Since we are in the middle of tax season and e-File has opened, IRS operations will be deemed an ‘essential service’ in the context of a government shutdown, which means IRS operations, including processing returns, issuing refunds, and customer service will continue.”

What Happens Next

As the shutdown deadline approaches, taxpayers should monitor updates from the IRS and other official sources. Filing tax returns electronically and as early as possible can help mitigate potential delays.