Parts of IRS to close in event of government shutdown

In brief

The IRS on September 28 posted its Fiscal Year 2024 Lapsed Appropriations Contingency Plan, which would apply in the event of a government shutdown this weekend. The plan provides that approximately 30,000 employees could continue to work, while the rest of the agency’s approximately 90,000 employees would be furloughed and could not work either in IRS offices or at home. This is a change from the IRS’s Fiscal Year 2023 plan, which had provided that the agency would remain fully open and funded with funds provided from the Inflation Reduction Act (IRA). 

Observation: Any shutdown will affect many of the agency’s routine activities, including audit functions and answering taxpayer phone calls. These disruptions could serve to delay the closing of examinations and prevent taxpayers from resolving problems in a timely fashion. A further consideration in these delays is the upcoming filing deadline for many corporations on extension, as any taxpayer account issues will be difficult to resolve in a timely manner. 

While many open questions remain, the new shutdown plan provides several details:

• The IRS will continue activities to implement the IRA green energy credit provisions, as well as activities to implement the IRS Strategic Operating Plan and the Direct File pilot program. Employees who are allowed to work will be paid using IRA resources.
• Close to 3,000 employees supporting IRA initiatives will be excepted and not furloughed. 
• Certain programs including the US Residency Certificate program and the Income Verification Express Service (IVES) will remain operational (through funding other than annual appropriations), while many other taxpayer service programs will not.
• Activities determined to protect life and property will continue. These include processing payments, protecting statutes of limitations, and certain filing season work. 
• All audit functions and examinations of returns not tied to an exception will cease, as will most legal work not tied to an approved activity. 

The plan specifies positions that are excepted and allowed to work. Some IRS employees will cancel taxpayer appointments as part of the orderly shutdown procedure, while others will not. The IRS says it assumes that the public understands that certain functions are shutdown. Employees who are not excepted are prohibited from doing any government work (including looking at or responding to emails or calls) after a half day of permitted shutdown tasks. 

Note: The current plan is for five days. If a shutdown were to be extended, the IRS would revisit and update its plans.