As has happened numerous times in recent years, the mere possibility of a government shutdown spotlights several federal agencies, including the IRS, and raises questions about which services might be affected.
The U.S. federal government shut down on October 1, 2025, and remained shuttered for the longest period in U.S. history: 43 days. That happened after Congress missed a September 30 funding deadline.
The shutdown impacted numerous individuals and federal agencies, with the IRS seeing its services reduced after an initial contingency period.
Now, President Donald Trump told Fox News that he believes the federal government will “probably” shut down at the end of January if Congress doesn’t reach a deal.
“I think we have a problem, because I think we’re going to probably end up in another Democrat shutdown.” Trump made the statement while attending the January 2026 World Economic Forum in Davos.
And, the IRS has already been in the news because of significant changes in its operations, funding, staffing and leadership.
So, how would a government shutdown impact the IRS and your taxes? Read on.
IRS tax season concerns
Under the Biden administration, the IRS had been cracking down on fraud and tax scams. The tax agency also wanted to hire 3,700 new agents to audit complex returns, though, as Kiplinger reported, the agency hit some roadblocks partly due to a lack of interest in the accounting field.
In addition to ramped-up enforcement efforts, the IRS had touted gains such as reduced processing times, faster tax refunds, shorter wait times for taxpayer phone assistance, and improvements with paperless processing.
However, over the past year, the tax agency has faced priority shifts and chaos.
There have now been 7 acting IRS commissioners in just the first 8 months of Trump's second term. Treasury Secretary Scott Bessent now serves as IRS Commissioner, while Frank Bisignano of the Social Security Administration simultaneously holds the newly created position of "IRS CEO."
The tax agency is also grappling with a revolving door of other senior officials, funding cuts, and significant workforce reductions that could impact its ability to carry out customer service responsibilities and implement Trump's new tax bill. initiatives.
For example, the IRS is entering 2026 with significantly less funding than in previous years:
- A bipartisan funding agreement reduces IRS appropriations for FY2026 by about 9 % compared with FY2025 levels.
- Other budget reports show the IRS’s total budget could be down as much as $8 – $10 billion from prior plans — largely because supplemental funding from the Inflation Reduction Act was rescinded over time.
These cuts have implications for operations, enforcement, and customer service levels.
Government shutdown 2026?
As of late January, Congress is actively negotiating appropriations bills.
- A bipartisan “minibus” funding package has cleared some hurdles in the United States House of Representatives and the U.S. Senate
- House lawmakers have reported progress on most of the 12 annual spending bills
- That could make a shutdown less likely than Trump’s recent remark suggests
Still, differences remain on key spending priorities (including Homeland Security). Final votes will be key.
Worthy of note: The last time the government shut down was following the Sept. 30, 2025, deadline. That historic shutdown lasted 43 days until mid-November under a stopgap bill approved first in the U.S. Senate.
As Kiplinger has reported, at that time, Democrats were fighting to repeal nearly $1 trillion in GOP Medicaid cuts that would reduce health care coverage for millions, including older adults, children, and people with disabilities. They also want to extend enhanced Affordable Care Act premium tax credits to keep health insurance affordable.
Some policy analysts and organizations argued that the proposed Medicaid cuts in Trump's 2025 tax and spending bill will force states to reduce benefits, jeopardize hospitals, and increase the uninsured population in the U.S. by over 10 million.
Meanwhile, President Trump and Republicans wanted a "clean" continuing resolution.
Still, at the time, the Trump administration directed federal agencies to prepare for potential large-scale, permanent layoffs of federal employees during the shutdown. (That was a break from past shutdowns, which usually involved temporary furloughs.)
What happens when the government shuts down?
Normally, during a government shutdown, most federal agencies and workers experience some impact. All "non-essential" work is forced to stop.
However, federal agencies have backup plans, and essential services continue to function — at varying levels. For example, critical services like Social Security, Medicare, and Medicaid payments continue.
Of course, anytime the federal government shuts down, significant impacts ripple throughout the U.S., affecting people across the U.S. in different ways.
President of the National Treasury Employees Union, Doreen Greenwald, has emphasized in the face of previous shutdown threats, that “a government shutdown is not a harmless, DC drama. Federal employees in every American community will lose income, through no fault of their own, and, in many cases, they will be locked out of doing the work they were hired to do for the American people,” Greenwald stated in a release.
NTEU represents federal workers in 35 departments and agencies.
Does the IRS close during a shutdown?
Initially, it was assumed that the IRS would function as usual during a government shutdown, at least for some period, as its operations could be sustained through IRA funding. (That held for the first 5 business days of the 2025 shutdown.)
On September 29, 2025, the U.S. Treasury Department released an updated FY26 Internal Revenue Service contingency plan. Under that plan:
- Most core tax administration activities would not stop, mainly due to funding from the Inflation Reduction Act (IRA) passed during the Biden administration.
- Nearly 74,300 IRS employees would initially remain on the job, according to the plan.
- Most services, authorized and funded by the IRA plan, would continue for at least five days from the shutdown date.
Note: After about day 5 of the 2025 shutdown, half of the approximately 74,000 employees were furloughed as most IRS operations ceased. While E-filing and payments continued, refunds, in-person and telephone assistance, audits, appeals, and paper processing were delayed or temporarily suspended.
Some industry experts believe those delays could be felt in the upcoming 2026 tax filing season, since a backlog may persist.
If a 2026 shutdown happens (the federal government has never shut down during tax season):
- Expect service delays, especially for refunds and customer assistance
- Processing backlogs may extend well into mid-2026
- Tax Deadlines would most likely remain in place
- IRS employees could be furloughed or working under contingency status without pay until funding resumes.
Shutdown 2026 bottom line
As of now, the IRS remains active but budget-strained.
A government shutdown hasn't been ruled out, and the IRS’s ability to operate smoothly during tax season could be significantly affected by how Congress and the White House resolve the current budget dispute.
As a result, stay informed about any potential impacts on your fax filing process or communications from the IRS.
Note: This story has been updated to reflect recent developments.
