The IRS will continue operating during tax season, even if a government shutdown occurs, due to existing appropriations from the Inflation Reduction Act (IRA), according to a Treasury Department contingency plan.

As Accounting Today reports, acting IRS commissioner Melanie Krause informed staff they would be exempt from furloughs and that filing electronically remains the best option for timely return processing. Paper filings may experience delays, especially if manual intervention is required. 

According to the Journal of Accountancy, the contingency plan states it "describes actions and activities for the first five (5) business days following a lapse in appropriations."

Despite this reassurance, recent staffing reductions have created significant uncertainty. The IRS has already laid off approximately 7,000 employees, with reports suggesting plans to cut up to 50% of its workforce by year’s end.

A federal judge recently ordered the reinstatement of some Treasury Department workers, but more layoffs could follow after tax season ends in April. Tax professionals worry about the impact on customer service, audits and guidance on new tax laws. 

The National Treasury Employees Union warned IRS leadership on March 14 that failure to follow their collective bargaining agreement during layoffs could violate federal law. The union emphasized that massive workforce cuts would harm both civil servants and the IRS’s ability to collect government revenue. 

The Journal said that the IRA allocation was reduced to $60 billion over 10 years in the Further Consolidated Appropriations Act, 2024, P.L. 118-47. Congress passed act in March 2024, which also provided $12.3 billion as a base budget for fiscal year 2024, the same as in fiscal year 2023.