The IRS has taken the drastic step of shutting down most of its operations and issuing widespread furlough notices to its staff as the government shutdown stretches beyond what the agency’s initial contingency strategies had anticipated. This significant development means that the IRS is largely offline, impacting many services and leaving employees in a state of uncertainty.
On Wednesday morning, the IRS made an official announcement on its website stating, “due to the lapse in appropriations, most IRS operations are closed.” This closure follows the initial shutdown period, during which the IRS had kept all employees actively working for the first five business days, preparing for the upcoming tax filing season. However, the agency’s contingency plans did not clearly outline the course of action if the shutdown were to continue past October 7, which is now the case.
Starting Wednesday, an "IRS-wide furlough" has been implemented, affecting all employees except those already identified as excepted or exempt due to the critical nature of their roles. The exact list of employees who remain active has not yet been released, because the IRS has not provided an updated contingency plan detailing these specifics.
The agency’s message to staff explains that those not designated as exempt or excepted are furloughed, meaning they are placed on a temporary unpaid leave without duties, until further notice. Despite this, all employees are instructed to be prepared to return to work when called upon. Additionally, furloughed and excepted workers will receive back pay once the shutdown concludes — an assurance rooted in the Government Employee Fair Treatment Act of 2019, which was enacted after the record 35-day government shutdown ended in January 2019.
But here’s where it gets controversial: the Office of Management and Budget (OMB) recently introduced a draft legal interpretation suggesting that back pay for furloughed employees might no longer be guaranteed automatically. Instead, this new stance argues that Congress must explicitly approve back pay in any stopgap funding legislation. This interpretation has sparked bipartisan criticism and raised serious legal questions, with many experts skeptical about the OMB’s position.
House Speaker Mike Johnson (R-La.) weighed in, reaffirming the traditional and statutory expectation that federal employees will be compensated, saying, “They should not be subjected to harm and financial dire straits.” This statement highlights the tension between administrative memos and established laws—an issue that has stirred debate and could influence policy and employee morale going forward.
In practical terms, employees are being given up to four hours to wrap up any immediate work responsibilities, such as updating voicemail or email auto-responses, before receiving formal furlough notices. Acting Chief Human Capital Officer David Traynor clarified in a letter that only those with specific, critical duties are exempt from the furlough, and unless an employee has been directly informed otherwise, they are to consider themselves furloughed starting October 8, 2025.
On the ground, some IRS employees have already been notified locally about their furlough status, with managers reaching out outside of regular hours to inform staff, revealing the challenges of managing communications during such disruptions.
Interestingly, the IRS has been relying heavily on funds from the Inflation Reduction Act (IRA) over the past years—more so than what was proposed under the Biden administration’s plans—to modernize its technology and rebuild its workforce after years of budget reductions. These IRA funds helped the IRS attempt to remain operational during past shutdown threats.
Initially, when faced with a potential shutdown in September 2023, the IRS planned to stay "fully operational" by using IRA funding, but it later became clear there were legal and practical limits to how these funds could support ongoing operations without approved appropriations. As a result, the IRS had to plan for furloughing up to two-thirds of its workforce during a shutdown, a sobering reality for both staff and taxpayers depending on IRS services.
The Treasury Department noted that while certain IRS functions funded by the IRA or covered under long-standing government exemptions will continue during a shutdown, the vast majority of IRS operations will halt.
Additionally, the IRS is in the midst of gearing up for next year’s tax filing season while implementing major tax code changes introduced by the so-called “Big Beautiful Bill” signed by President Trump in July. These changes add another layer of complexity, as the agency must manage both operational disruptions and legislative updates simultaneously.
This situation raises a critical and possibly contentious question: How should essential government services balance fiscal constraints during a shutdown with the need to serve the public effectively—and what obligations do they have to protect their employees from financial hardship? These debates are far from settled, and the evolving IRS furlough situation may serve as a key flashpoint.
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