Since the U.S. government officially entered the 2025 shutdown on October 1, many agencies have seen their work forces cut back to bare operational minimums, or further. Many government workers, such as air traffic controllers, the military, and other staff have been required to continue working, with the anticipation that they will receive back pay for their time worked – when the shutdown ends.
Thus far, the military has continued to be paid, along with a few other government sectors, but how long this lasts is questionable. For the first week of the shutdown, for example, the IRS largely maintained normal operations using leftover funds from the Inflation Reduction Act of 2022. However, by the second week, the IRS had furloughed almost half of its employees, with those still working expected to handle “excepted and exempt” activities.
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Short-Term Effects on Critical Income Tax Deadlines and Systems
October 15 of each year is the second largest income tax deadline on the calendars of many accountants and tax professionals. That was the filing deadline for any taxpayer who had filed an Application for Automatic Extension of the time to file an income tax return (form 4868), which extends the filing deadline for six months … until October 15. While this is, as its name implies, automatically granted for virtually all taxpayers, they are still required to pay estimated or expected taxes by the annual April 15 deadline, while they continue the process of filing their return.
With nearly half of the IRS workforce furloughed, and most IRS contractors out, the agency hobbled through the October 15 deadline with growing complaints from filers and professionals, particularly regarding phone and tech support availability.
Coming soon: The October 31 deadline for filing quarterly estimated income tax payments and payroll taxes.
As the shutdown enters its fourth week, the effects are continuing to cause headaches for tax pros, and increasing worry about the 2026 income tax filing season.
“It’s too early to say definitively, but any sustained shutdown has a ripple effect that can carry well beyond the immediate timeline,” said Garrett Wagner, CPA, the founder of accounting firm consultancy C3 Evolution Group. “The IRS was already facing delays and a growing backlog. Even a short pause in IRS operations will expand the issues we are already seeing.”
For firms and practitioners, that means more uncertainty and delays. We’ve seen enough over the last few years to know that slowdowns — whether from pandemic disruptions or resource shortfalls — always end up translating into last-minute guidance, delayed form approvals, and added complexity during tax season, which bottom line is more pain for our clients. So, while the full impact depends on duration, there’s no version of a shutdown that doesn’t add friction for both taxpayers and practitioners.
Quarterly Estimated Payments and Payroll Taxes
- Payment Processing Continues: Despite the shutdown, taxpayers were still required to meet the October 15 deadline for extended 2024 returns and the Q3 2025 estimated tax payments to avoid penalties. Electronic payments are the safest and most reliable method, as paper checks will face delays in processing, contributing to the existing backlog. For taxpayers who make estimated payments each quarter, the next deadline is October 31.
- Monthly Payroll Tax Deposits: Automated systems, including the Electronic Federal Tax Payment System (EFTPS), remain operational for businesses to make their routine monthly payroll tax deposits. Failure to deposit on time will still incur penalties.
System Availability and Communications
- FIRE System & E-File: E-filing systems, including the Filing Information Returns Electronically (FIRE) system and EFTPS, have largely remained online and functional for the remaining IRS staff. The agency says it has prioritized keeping these automated systems running.
- Notice Backlog: Automated compliance and collection notices will continue to be generated and mailed by the system, even though the staff that usually addresses, resolves, or stops those notices are largely furloughed. This creates a challenging situation for tax pros trying to resolve client issues, as phone lines are severely limited or unavailable, and written correspondence is backlogged in processing centers.
- Audits and Collections: Non-automated compliance actions, including most audits and collection activities (e.g., liens and levies), have been mostly suspended due to the massive reduction in enforcement staff.
The 2026 Income Tax Filing Season
The most significant professional concern revolves around the 2026 Tax Filing Season for Tax Year 2025, which usually begins on the last Monday of January each year, concluding with an April 15 deadline.
The enactment of the 2025 One Big Beautiful Bill Act (OBBBA) earlier this year mandated several complex changes in tax laws that require the IRS to create new forms and instructions, as well as to update the software systems the agency uses to process tax returns. Likewise, independent tax software companies also need to update their systems, which are used by tax professionals and consumers.
- New Tax Law = New Tax Forms: The retained IRS staff is tasked with implementing the OBBBA changes and testing systems for the upcoming filing season. A prolonged shutdown directly compromises this crucial preparation timeline. The clock is ticking on finalizing new forms for the tax software industry to incorporate and test.
- Will Tax Season be Delayed?: Any delay in finalizing forms and completing system testing will force the IRS to push back the official start date of the 2026 Filing Season. This last happened in 2020 during the Covid pandemic, and if it occurs in 2026, it could cause headaches for pros and consumers, as well as longer wait times for income tax refunds.
- Income Tax Refunds are All Electronic in 2026: Adding to the challenge is the federal government’s decision to eliminate paper check income tax refund checks starting this coming tax season. This will put additional strains on staff to prepare for high volumes of Direct Deposits, as well as a requirement for taxpayers to ensure they have a refund account available. For taxpayers without a traditional bank, reloadable debit card options are available on the market that should be able to accept refund deposits, but they should look carefully at potential fees for using them.
The immediate risk is that the current shutdown has a good chance of delaying the start of the 2026 income tax filing season if it persists much longer, because of the time needed to create new forms and directions, and update software systems.
“So far, we’re seeing more concern than panic — but the questions are starting. Clients are aware that the IRS is already stretched thin, so when they hear ‘shutdown,’ it immediately raises questions about response times, refunds, and pending notices,” Wagner said. “The larger issue is trust in timing. Things were already bad when it comes to the IRS and ability to get a response from them or get them on the phone and this will only make things worse.”
If the shutdown drags on, taxpayers and tax professionals should brace for a potential extension to the April 15, 2026, filing deadline, if the IRS is not ready to accept and process tax returns due to the lack of finalized OBBBA-compliant forms and fully tested systems.
Taxpayers must continue to pay their income taxes on time, unless the agency instructs otherwise, while tax professionals need to start preparing their clients for a potential delay. Professionals also need to keep a heightened awareness of the new tax laws, and should seek educational resources and guidance on them.
“We can only control what’s within our reach,” said Wagner. “What we can control is how proactive we are with our clients — anticipating issues, offering clear guidance, and responding quickly when concerns arise. Every time a client reaches out, it’s an opportunity to lower their stress and strengthen trust. The best way to navigate uncertainty is simple: communicate early, often, and with empathy.”
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