Government Shutdown Could Cause Havoc for Tax Season

As millions of Americans prepare to start filing their taxes, and thousands of tax professionals prepare for one of their busiest seasons of the year, the U.S. Congress still lacks an annual appropriations bill to fund the government.

If legislators fail to reach a funding agreement by Feb. 2, or at least agree on a short-term funding measure, the federal government could shut down. This would result in the furloughing of most federal employees, including at the Internal Revenue Service. This would throw a wrench in the 2024 tax filing season, possibly delaying tax refunds.

According to IRS Commissioner Danny Werfel, the agency could still maintain some operations, depending on the length of a government shutdown.

IRS Commissioner Danny Werfel.

“We’ll have a variety of different carve-out elements that will allow us to maintain operations,” Werfel said, yet noting that a shutdown would “increase the risk that we don’t have as smooth a filing season as we intend to have.”

“We have experienced shutdowns before. We have not experienced shutdowns in the middle of filing season. So there’s some uncertainty there,” he added.

One of the more contentious issues in the government budgeting negotiations in Congress is the $80 billion in funding the IRS received under the 2022 Inflation Reduction Act, which is aimed at improving customer service, technology, and collection efforts aimed at high net worth filers who owe back taxes. The current House of Representatives, led by Speaker Mike Johnson (R-LA), is trying to undo that appropriation.