The IRS Shutdown is Here — What It Means for Tax Incentives

For those of us who work closely with the IRS every day, this isn’t the first time we’ve seen Washington gridlock impact agency operations.

And while the current government shutdown doesn’t stop businesses from meeting their tax obligations, it does make it harder for the IRS to meet theirs, particularly when it comes to processing credits, issuing refunds, and responding to taxpayers.

Where Things Stand Now

The federal government entered a shutdown on October 1, and the IRS has been operating under a short-term contingency plan funded through the Inflation Reduction Act (IRA). That Lapse Appropriations Contingency Plan, designed to keep essential services running for approximately five business days, ends October 7, 2025.

If Congress does not reach a funding agreement soon, the IRS will scale back nonessential operations. In practical terms, that could mean:

• Reduced or no responsiveness from IRS correspondence units and call centers

• Delays in processing, particularly for amended or paper-based filings

• Slower or no release of new guidance or form updates tied to recent tax legislation 

• Postponed audits, appeals, or hearings as staffing levels drop 

The IRS is likely to prioritize essential functions such as electronic return acceptance, automated payment processing, and system security. However, if the shutdown continues, growing backlogs could mirror the challenges seen during the 2018–2019 shutdown — when it took months for the agency to catch up on delayed work.

What We Learned from the 2018-2019 Shutdown

During the 35-day shutdown in 2018-2019, the IRS paused most audits and significantly slowed refund processing. Customer service lines closed, and many businesses experienced weeks-long communication delays.

When funding was restored, the IRS required several months to work through the backlog, illustrating how even a temporary lapse can create long-term administrative delays.

What This Means for Tax Credits

The potential impact lies in administration and processing, not in eligibility or deadlines. A prolonged shutdown could slow the review or refund process, but it won’t affect a business’s ability to claim legitimate credits, and it won’t change filing due dates.

Tax laws remain in force, meaning businesses can still file for and claim incentives such as: R&D Tax Credit, 179D Energy-Efficient Commercial Building Deduction, Cost Segregation Deduction, etc.

How ABGi Is Supporting Clients

ABGi continues to operate as usual and is actively submitting claims within deadlines so clients remain in the queue once the IRS returns to full operations.

Our technical and tax teams are monitoring updates from the IRS and professional associations on a daily basis, and we will share any changes that could impact our clients.

Because we work directly with the IRS on behalf of clients across multiple programs, we’re tracking updates in real time – not just reading them after the fact.

Our goal for our clients is simple: to minimize disruption, maintain compliance, and protect the tax benefits your business is entitled to.

What Businesses Can Do Now 

1. File electronically whenever possible. Electronic submissions are prioritized when staffing is limited. 
2. Stay ahead of documentation requests. Submitting complete, well-supported claims now helps avoid later delays. 
3. Stay connected. ABGi will share updates as soon as the IRS issues new operational guidance or relief measures. 

Bottom line: 
 A government shutdown doesn’t change tax law, but it does slow down tax administration. By working with ABGi and acting early and staying informed, you can keep your tax incentives moving forward. 

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