Shutdown Means IRS Will Collect Your Taxes But Not Pay Refunds

The IRS contingency plan says the agency will continue to collect taxes in a shutdown but does not pay refunds.

Updated: Monday, January 7 5:34 PM EST

The Internal Revenue Service is one of the federal agencies that is impacted by the current partial government shutdown. According to the agency’s contingency plan for lapsed appropriations, taxpayer refunds are one of the things that will be affected. This is also one of the more noticeable functions performed by the IRS that taxpayers would be likely to miss if payments were to be delayed.

The contingency plan lists “non-excepted activities” that are impacted by a lapse in appropriations. It notes that federal employees who work in positions with these functions would be furloughed.

Tax refunds are among the non-excepted agency activities listed. Others include:

  • Service center processing after the point of Batching (i.e. Code & Edit, data transcription, error resolution, un-postables)
  • Processing Non-Disaster Relief transcripts, Income Verification Express Service/Return and Income Verification Services
  • Processing 1040X Amended Returns
  • Most Headquarters and administrative functions not related to the safety of life and protection of property
  • All audit functions, examination of returns, and processing of non-electronic tax returns that do not include remittances
  • Non-automated collections
  • Legal counsel
  • Taxpayer services such as responding to taxpayer questions (call sites) (during Non-Filing Season)
  • Information systems functions (except as necessary to prevent loss of data in process and revenue collections)
  • Planning, research, and training and development activities

It will be harder for taxpayers to get assistance from the agency right now as well since call sites and responding to taxpayer questions are among the items cited as activities subject to the shutdown.

However, the IRS will continue to maintain computer systems to prevent loss of data, maintain safe working conditions for excepted personnel, and continuing criminal enforcement.

The IRS contingency plan said that 9,946 agency employees (12.5% of the IRS workforce) for FY 2019 are considered exempt and therefore authorized to remain working during a shutdown. It is likely, however, if the shutdown were to continue into the start of tax filing season that many more IRS employees will be exempted to handle the extra workload. To date, the IRS has not announced an official start date for the 2019 tax filing season.

Early Tax Refunds

Even though tax day is April 15 each year, that does not mean the partial government shutdown couldn’t potentially be disrupting for tax refunds before then.

The Wall Street Journal reported that by February 2, 2018, the IRS had paid $12.6 billion in refunds to more than 6 million households and by February 16, that figure increased to $101.2 billion for nearly 32 million households. By March 30, the IRS had paid $212 billion to 73 million households, so the longer the shutdown continues, the more potential it has to delay or disrupt tax refunds.

Update: The White House said Monday that it was reversing prior policy and tax refunds will go out even if the shutdown continues.

FY 2019 IRS Shutdown Contingency Plan

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.