The IRS Clock Keeps Ticking Despite Staff Shortages and Backlogs

Now that the longest US government shutdown ever has ended, and most furloughed employees have returned to work, the IRS says that it has resumed normal activities.

But thanks to backlogs and pent-up demand, taxpayers might have to get used to long waits for responses to correspondence similar to what they experienced due to the pandemic.

Even if the IRS manages to fully staff its telephone lines, IRS personnel who approve refunds, or fix taxpayers’ issues are behind and resolution will take longer than usual. Most of the personnel in the Taxpayer Advocate Service, which helps taxpayers resolve long-pending matters, were furloughed, creating delayed responses in that office.

Reduced IRS staffing thanks to layoffs, buyouts, and retirements earlier this year will only exacerbate delays—the IRS lost about 25% of its personnel in the first five months of 2025. Once the full impact of the deferred resignation and other voluntary and involuntary separations is evaluated, that number could increase.

Despite the staffing losses and shutdown, many deadlines aren’t paused or tolled. For instance, the period of limitations for the IRS to make assessments and for taxpayers to file claims for refunds continued to run during the shutdown. Taxpayers should look at these important post-shutdown considerations:

The IRS protects assessment and collection statutes. The agency closely monitors the period to make assessments and collections and will take necessary steps to prevent those time frames from expiring.

As a result, the shutdown could have caused the IRS to accelerate issuing a statutory notice of deficiency or collection processes without providing taxpayers with the usual opportunities to challenge the government’s position.

A taxpayer that receives a statutory notice of deficiency has only 90 days to file a petition in the Tax Court before the IRS can make an assessment and collect the tax. A taxpayer has two years after receiving a refund claim disallowance to file a refund suit, and the fact that the taxpayer is in examination or appeals doesn’t extend that time. A tax adviser can explain the options and help determine the best way to proceed.

There are more IRS requests for statute extensions. The IRS might ask for taxpayer consent to extend the period of limitations on assessment if the period is close to expiring during an ongoing examination or appeal.

Because the shutdown didn’t toll the period to assess tax, but did put examinations and appeals behind schedule, many taxpayers will receive a request for consent to extend the period of limitations on assessment. Taxpayers should consult with their tax adviser and carefully consider how to respond to these requests.

Interest continues to accrue. During the shutdown and the time that it takes the IRS to catch up with the shutdown backlog, interest continues accruing on tax owed to the IRS and refunds owed to taxpayers.

Making a payment can stop the running of interest, but if taxpayers believe they don’t owe the tax, making a payment could foreclose their ability to continue to challenge the liability. Instead, if certain procedures are followed, taxpayers can make a deposit to stop the accrual of interest while working to resolve the matter with the IRS. The deposit can be returned if the taxpayer doesn’t owe the tax.

The rules for ensuring that an amount is treated as a deposit and not a payment are complex, so taxpayers should consult with their tax adviser before making a deposit. Interest also is often miscalculated so tax advisers might be able to assist with calculating interest and seeking refunds or additional interest if the IRS incorrectly determines the amount of interest paid or due.

As IRS operations continue to recover from the shutdown, uncertainties for the IRS and the 2026 filing season remain. Taxpayers should stay vigilant to keep track of matters that were before the agency prior to the shutdown and new matters initiated during the shutdown to protect against expiration of important deadlines and potential IRS errors.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Rochelle Hodes is a principal in Crowe’s national tax office in Washington, DC, and previously served in the Office of Tax Policy at the US Department of Treasury and the IRS Office of Chief Counsel.

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