As of Oct. 8, 2025, the IRS has activated its fiscal year 2026 Lapsed Appropriations Contingency Plan, since Congress has not yet passed annual funding legislation. The updated plan covers an extended lapse scenario through April 2026, should the funding gap persists until then. Past shutdowns (such as the 2018-2019 lapse) caused major disruptions, including refund delays, suspended audits and a backlog that took months to clear. The new plan seeks to minimize any similar impacts by prioritizing life, property and data protection during this funding lapse. Here’s a breakdown of the plan.

Workforce management and exempt vs furloughed employees

Out of ~74,299 employees (as of July 2025), 39,870 (53.6 %) will continue working. The remainder of the employees will be furloughed until funding is provided to resume normal operations. To be considered necessary (deemed “exempt” or “excepted”), employees must:

• Already be funded by multi-year or no-year appropriations (i.e., not dependent on annual appropriations) 
• Maintain activities “authorized by law,” even in a lapse context 
• Provide functions necessary to safeguard life or property (with a strict standard) 
• Complete tasks necessary to effect an orderly shutdown and to protect government property or data

Activities that continue under the plan

The plan distinguishes services under specific categories (A, B, C) for exempt or exception-based continuation:

Category A1 (funded by nonexpiring funds/legally allowed)

• Certain taxpayer verification services (e.g., the Income Verification Express Service (IVES)) 
• Issuance of Form 6166, Certification of U.S. tax residency
• Some contract work, modernization efforts and tasks tied to legislated mandates (e.g., P.L. 119-21 / OBBBA) 
• Essential services connected to other agencies (Social Security, OPM) Category B (“safety of life/protection of government property”)
• Processing remittances and tax return payments, to protect those funds as government property
• Computer operations to prevent data loss, protecting infrastructure 
• Mail processing for remittances, disaster relief transcripts, etc.
• Protection of statutes of limitations, liens, seizures (i.e., preserving legal rights)

Category C (shutdown transition/“close down” operations)

• Finalizing and storing records, inventories, securing work in progress 
• Processing notices of furlough, performing shutdown-specific administrative tasks

Activities that cease

Many IRS functions outside the core “excepted” operations are suspended, including:

• Routine taxpayer assistance (e.g., answering general taxpayer inquiries, call centers) outside of filing season or emergencies
• Collections that are non-automated (manual enforcement)
• Legal counsel for non-excepted functions
• Research, training, long-term planning, IT enhancements outside of core mission or necessary to protect property/data
• Certain procurement, contract initiation and administrative overhead not tightly tied to exempt functions

How this plan affects taxpayers and tax professionals

Impact area	Effects and disruptions	Duration and severity notes
Customer support	Most non-emergency services are suspended; taxpayers are unable to get direct answers	During the entire lapse period (unless a function is “excepted”)
Processing non-remittance tax returns	Returns without payments aren’t processed; refund issuance is delayed	Until funding returns
Tax payments and remittances	The IRS will continue processing payments	This is one of the higher-priority excepted functions
Collections/ enforcement and audits	Non-automated collections and many audit activities are suspended	Could backlog significantly
Legal motions, litigation, appeals	Only those with imminent deadlines (“excepted” positions) will proceed; routine legal activity stalls	Time-sensitive matters are prioritized; others delayed
IT systems, modernization, digital services	Only minimal system maintenance to prevent data loss will continue; no new enhancements or non-essential updates	Innovation and upgrades paused
Tax professional support/publications/rulings/guidance	Less new guidance, fewer rulings, slow responses	Longer wait for responses and interpretation support
Filing season preparation and forms	Some tasks (designing, printing forms, testing) will continue if necessary to protect the upcoming filing season, but many supporting operations will slow	Risk to timely readiness for next filing season
Disaster tax relief/emergency assistance	Some disaster-relief tax services are designated to continue under “excepted” status, with limitations	For areas under disaster declarations, some continuity may remain
Statute and legal protection	The IRS will continue operations that preserve taxpayer or government rights (statutes of limitations, liens, etc.)	Prevents “clock running out” on enforcement rights

Key takeaways for October deadlines

Deadlines still apply during the shutdown, and statutory due dates remain unchanged. (See §6151, §6072, CFR 1.6072-1) This means the Oct. 15 filing deadline for individuals on extension remains in full effect even if IRS operations slow. The same is true for payment due dates. Interest and penalties will still accrue if a balance is due with the return. There is no automatic grace period or postponement unless Congress should enact any legislation or the IRS formally announces any relief (to date, neither has happened nor is pending).

Let clients know they should file and pay as usual. Clients should submit payments online and avoid mailing checks that could get stuck in a backlog. Remind clients to document everything and to keep proof of timely e-filing and payment.

After the government shutdown ends

Once appropriations are restored, all furloughed employees will be recalled to work. Under the plan, the IRS will notify employees via hotline, internal websites, call trees, etc. Employees are expected to report within four hours on a scheduled workday, or on the next scheduled workday if recall happens off schedule. During reactivation, management may permit telework or liberal leave as needed to facilitate a smooth transition.