When IRS goes Quiet: What Furloughs Mean for Taxpayers & Practitioners

The Internal Revenue Service recently announced plans to furlough nearly half of its workforce amid the current federal funding lapse and government shutdown. While this may sound like another bureaucratic hiccup in Washington, these furloughs could have real and immediate consequences for taxpayers, businesses, and professionals navigating already complex tax obligations.

What’s going on

Due to stalled federal budget negotiations, the IRS is preparing to suspend operations for thousands of employees, potentially impacting key functions such as processing mailed returns and correspondence, issuing refund checks or manual adjustments, responding to taxpayer inquiries or practitioner calls, scheduling and conducting audits or appeals, and/or handling collection actions and installment agreements. In essence, the IRS is entering a limited operations phase which means essential services like electronic payments and automated systems will continue, but human-handled matters may slow dramatically or stop altogether.

What this means for taxpayers

For individuals and businesses, the immediate impact depends on where you are in the tax cycle. If you’re waiting for a refund, expect longer delays with electronic refunds still moving but paper checks or manual reviews sitting in queue until a staff member returns. If you’re under audit or review, most audits, appeals, and case reviews will pause. However, this is temporary and taxpayers should continue locating essential documentation and may relieve the pressure for a short-period of time. If you owe taxes or are on a payment plan, collection may slow but interest and penalties will continue to accrue. If you’re facing enforcement or levy action, some automated notices may continue and system-related levies can still be issued. It is important to have updated contact information while closely monitoring your bank accounts.

Why IRS workforce changes matter

The IRS has been making real progress after years of backlog and underfunding which make the current furloughs detrimental in terms of minimizing such progress as it relates to: 2024 tax returns currently being corrected for credits and amended filings, reducing the effectiveness of the “Zero Paper Initiative” and making physical mailrooms critical, and continuing to reduce the size of the IRS workforce which has been decreased by approximately 20% since the pandemic.

This could cause major challenges for the 2026 tax year in regards to the processing of refunds, appeals, and even resolution of taxpayer disputes could be delayed for months.

Action Plan

We believe the best course of action for taxpayers is to stay proactive by keeping your filings, estimated payments, and documentation up to date. Your obligations are not paused while IRS action might be delayed. Be sure to document every communication attempt which includes mailings, faxed correspondence, and proof of submission. Don’t stop resolving issues. Attorneys and tax professionals can still work toward voluntary resolutions, prepare offers, or negotiate with automated systems. This downtime is an opportunity to get your case file in perfect shape. Call your trusted tax attorney to protect your financial future today. Lastly, be careful in relying on misinformation regarding waived penalties or tax holidays. The law doesn’t stop because the telephones do.

Final Thoughts

The IRS furloughs highlight the fragility of our tax infrastructure and pose as a reminder that IRS sits at the center of U.S. fiscal health. The IRS is constantly subject to political turmoil which further support the need for all taxpayers to build resilience into your tax strategy by staying digital wherever possible, keeping clean and accessible records, and planning for response delays when timing is essential.

If your tax matter is time-sensitive or if you’re uncertain how the furloughs might affect your case, we highly recommend not to wait until the IRS reopens. Seek guidance now and develop a proactive plan which may make the difference between a delayed response and a missed opportunity. We are here to help and invite you to call our firm today!

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.