After the shutdown: what tax professionals need to know

The federal government shutdown has officially ended. The 43-day shutdown, the longest in U.S. history, caused uncertainty for taxpayers, businesses and agencies across the country. With government operations resuming, tax professionals should prepare for increased activity and potential follow-up actions that may impact both individual and business filings.

What happened

On Nov. 12, Congress passed a bipartisan spending package to reopen the government and to fund most agencies through the end of January 2026. The agreement restores normal operations for critical departments, including Agriculture, Veterans Affairs and the legislative branch. It also ensures back pay for furloughed federal employees and provides a short-term bridge to prevent another lapse in funding while lawmakers negotiate longer-term solutions.

Why this matters for tax pros

When the federal government shuts down, its effects extend deeply into the tax and accounting world. IRS services can slow down, processing times stretch and guidance can be delayed. For tax professionals, the end of the shutdown is a time to help clients recover from disruptions and to expect delays as the IRS reopens. 

Here are a few key areas to consider as government operations resume.

1. Federal employees and furloughs

Federal employees and contractors were directly affected during the shutdown, with many facing unpaid furloughs or delayed paychecks. The new funding package guarantees back pay, with many expected to receive their pay within days. The various agencies have plans in place to issue compensation to those who went as long as 6 weeks without pay. Many of the furloughed federal employees will be recalled. Tax professionals should review how this will impact withholding, estimated payments, and income reporting for clients who were affected.

2. Filing delays and deadlines 

The shutdown delayed some IRS operations, including processing correspondence, issuing notices, and releasing new guidance. As the agency reopens, it will begin catching up on the backlog. Encourage clients to confirm that their filings remain current, especially if they are waiting for IRS responses.

Businesses that rely on federal contracts or regulatory guidance should review any updates that may have been postponed. Staying proactive now will help prevent missed deadlines later.

3. Issues that remain unresolved

Although the shutdown has ended, many budget and policy questions remain. The current funding measure is temporary, lasting only through January. Lawmakers will need to negotiate a broader spending package to prevent another disruption early next year. Expect additional legislation and guidance in the coming months.

The premium tax credit (PTC) is set to expire at the end of 2025 if Congress does not renew it. Many taxpayers receive assistance to offset the cost of their health coverage and will need to determine how to move forward with their healthcare if the credit sunsets. 

Action checklist for tax professionals

To stay ahead, take the following steps as the government transitions back to full operation:

• Review clients who are federal employees or contractors to confirm that back pay, withholding, and estimated payments are correctly recorded.
• Reassess business clients whose contracts, invoices or grants were delayed. Adjust financial projections and year-end estimates as needed.
• Confirm filing deadlines for any returns or payments that may have been impacted by the shutdown period.
• Be prepared for extended wait times to reach the IRS due to understaffing concerns that existed before the shutdown. 
• Communicate proactively. Send updates to clients explaining how the government‘s reopening affects their filings, refunds or compliance obligations.

Leading clients through transition

Tax professionals play a critical role in translating complex policy developments into practical guidance. As the shutdown ends, clients will look to you for clear explanations and actionable steps. Use this moment to strengthen your client relationships by offering timely updates, reviewing their current plans and preparing for the next phase of the fiscal year.  Helping clients maintain organized records and adaptive strategies can make future transitions easier.

Moving forward

While the government reopening brings relief, it also highlights the need for preparation and adaptability. Agencies will spend weeks catching up, and new legislation could surface before the next funding deadline. Encourage clients to use this period of stability to finalize year-end tax moves, review withholding and plan for 2026.

By maintaining clear communication, updating strategies and staying alert to new developments, you can turn a challenging event into a valuable opportunity for planning and growth.