IRS Halts Nearly Half of Its Workforce: What This Means for Taxpayers and Businesses in the U.S.

By Bianca Kegel, Managing Partner at Ace Advisors

The partial shutdown of the United States government has officially impacted the Internal Revenue Service (IRS) — the American federal tax authority.

As of October 8, 2025, the agency announced the temporary suspension of approximately 34,000 employees, equivalent to nearly half of its workforce, resulting in the interruption of a large portion of its regular operations.

While the government seeks a budgetary resolution, taxpayers and businesses should prepare for delays, limited support services, and longer processing times for tax-related requests.

Main Services Affected

During the furlough period (unpaid leave), the IRS has suspended or drastically reduced several essential services, including:

• Taxpayer assistance (call centers and in-person appointments);

• Manual collections and non-automated audits;

• Administrative and internal support processes not directly related to public safety.

Electronic and automated systems — such as e-File, online payments, and refund status inquiries — remain operational, but without human support for questions or corrections.

What Remains Operational

Despite the reduction, the IRS continues to operate areas considered strategic to the government and economy, including:

• Implementation of recent tax relief measures, such as exemptions on tips and overtime pay;

• Preparation for the 2026 filing season;

• Cybersecurity and data protection.

These functions are classified as essential to ensure continuity of fiscal policy and the protection of sensitive information.

Practical Impacts for Taxpayers and Businesses

The current situation requires planning and caution. The main expected impacts include:

• Refunds and amended returns may experience significant delays.

• Review requests and responses to IRS notices will be suspended until the shutdown ends.

• Automated letters will continue to be issued, but will not be reviewed by IRS staff during the furlough.

• Businesses that depend on tax authorizations or specific certifications should prepare for postponed requests and accounting adjustments.

Union Reaction and Political Context

The National Treasury Employees Union (NTEU), which represents IRS employees, criticized the decision.

“Due to the government shutdown, the American people have lost access to vital IRS services,”

said Doreen Greenwald, President of the NTEU.

The agency had managed to remain open for an additional five days using special funds approved in 2020, but those resources have now been exhausted.

Although a recent White House memorandum raised doubts about retroactive pay, the 2019 Government Employee Fair Treatment Act guarantees full back pay to IRS employees once the shutdown ends.

Ace Advisors’ Guidance

At Ace Advisors, we are closely monitoring IRS updates and their impact on filings, extension deadlines, and tax compliance processes.

Our practical recommendations for this period are:

✅ Avoid physical correspondence with the IRS; prioritize electronic communication through official online portals.

✅ Monitor deadlines, but keep in mind that responses and confirmations may be delayed.

✅ Retain all proof of submission and electronic communication records.

✅ Consult your tax advisor before making decisions that depend on IRS validation.

Our team remains available to assist clients facing delays, deadline concerns, or the need to adjust filings during this period.

Conclusion

The IRS shutdown highlights the importance of proactive tax planning, especially during times of government uncertainty.

The Ace Advisors team will continue monitoring the situation and will inform clients as soon as there are official updates regarding the resumption of operations.

Ace Advisors is committed to providing clarity, compliance, and tax security — even in times of uncertainty.