Looming Government Funding Lapse Raises Uncertainty for IRS Operations
The 2026 federal tax filing season began on January 26, just days before the United States entered a partial government shutdown at 12:01 a.m. EST on January 31, 2026, after Congress failed to finalize all required appropriations bills for the fiscal year. This partial shutdown resulted from disagreements over funding for the Department of Homeland Security and other unresolved budget items.
The timing of this shutdown coincides with the peak of tax season — a scenario that has not occurred previously in U.S. history, and it has prompted questions about how quickly taxpayers will receive their refunds.
IRS Contingency Plans and Service Adjustments
During funding lapses, federal agencies typically operate only essential functions under carefully structured contingency plans. The Internal Revenue Service (IRS), whose funding depends on annual appropriations, is among the agencies affected by the shutdown.
Past IRS contingency plans, such as those implemented during the 2025 shutdown, show that:
- Refunds may not be issued during a shutdown except for a specific category of returns.
- The IRS historically furloughed significant portions of staff once appropriated funds were exhausted, slowing operations considerably.
Under these plans, the agency prioritizes a limited set of essential tasks but halts many others, particularly those requiring human intervention.
Who Will See Delays — and Who Likely Won’t
Taxpayers face a bifurcated refund outlook this year:
1. Electronically Filed, Error-Free Returns:
Tax refunds linked to electronically filed, error-free Form 1040 returns that can be automatically processed and direct deposited may still be issued even during a shutdown. This is because automated systems require minimal human involvement.
2. Paper Returns and Manual Reviews:
Refunds tied to paper-filed returns, cases requiring manual review, amended returns, identity verification issues, or other complexities are far more likely to be delayed. These returns depend on IRS employees who may be furloughed or otherwise unable to work until funding resumes.
The IRS typically takes up to 21 days to issue refunds for electronically filed returns under normal conditions. However, during funding lapses, this benchmark is not guaranteed, particularly for non-automated processing.
Broader Operational Impacts and Service Constraints
In addition to refund timing, the IRS is expected to experience reduced customer service and limited in-person assistance as a result of the shutdown and ongoing staffing challenges. These include:
- Closure of walk-in taxpayer assistance centers.
- Limited telephone support and responses to taxpayer inquiries.
- Delays in correspondence, audits, and other services requiring staff involvement.
Compounding these challenges, the IRS has faced a substantial workforce reduction in recent years, shrinking by more than a quarter from prior levels. This has raised concerns from oversight officials about the agency’s capacity to process returns efficiently even without a shutdown.
Filing Deadlines Remain in Effect
Importantly, taxpayers are still required to meet regular filing deadlines, including the April 15 deadline for 2026 returns. The shutdown does not automatically extend or alter statutory tax deadlines, and failure to file or pay on time can result in penalties and interest.
IRS Advice to Taxpayers
While official guidance acknowledges uncertainty, there are clear patterns from IRS operations during past funding lapses:
- File electronically and select direct deposit to improve the likelihood of timely refunds.
- Ensure all bank and deposit information is accurate to prevent avoidable delays.
- Monitor IRS status tools such as “Where’s My Refund?” for updates on refund processing.
Outlook
The ultimate impact on refunds will depend on several variables, including the duration of the shutdown, congressional action to restore funding, and the volume of tax returns requiring manual intervention. Even a short funding lapse during this critical early window has the potential to create processing backlogs that extend beyond the shutdown period.
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