IRS uses Inflation Reduction Act funding to stay open during shutdown

The Internal Revenue Service is leveraging extra funding left over from the Inflation Reduction Act of 2022 to keep running for the next few days during tax season despite the partial government shutdown.

The IRS posted a contingency plan late Friday indicating that it would be able to use the funding to operate until Feb. 7, 2026, while keeping all 74,942 employees working. 

"Section 10301 of the Inflation Reduction Act, Pub. L. 117-169, provided supplemental appropriations available through September 30, 2031, for all IRS appropriations accounts," said the plan.  "With this funding the IRS will not experience a lapse in appropriations on January 31, 2026, and normal IRS operations will continue. This plan would go in effect January 31, 2026 and cover bureau operating needs until February 7, 2026."

The IRS was similarly able to use funding from the Biden-era legislation for the first five days of last fall's 43-day government shutdown, but ultimately the IRS needed to close down most operations as the shutdown dragged on past the first week. However, that shutdown did not occur soon after the start of tax season, as this one did. The Inflation Reduction Act appropriated $80 billion in extra funding for the IRS over 10 years, but that amount has been subsequently cut in half by Congress.

The AICPA sent a letter last Thursday to IRS leaders asking them to keep 100% of IRS employees working during the shutdown, pointing to the impact on tax season.

"The consequences of furloughing IRS employees, reducing taxpayer and practitioner services, and introducing the prospect for prolonged or widespread technology disruptions could prove to be detrimental to the success of the filing season currently underway and the effective and timely implementation of recent legislative changes," wrote AICPA Tax Executive Committee chair Cheri Freeh in the letter, addressed to IRS acting commissioner and Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano.

The Senate passed an extension over the weekend to funding for most agencies, including the Treasury and the IRS, but disagreements remain over funding for the Department of Homeland Security and its Immigration and Customs Enforcement unit. Democrats want to see changes in ICE policy before approving long-term funding. The House was out of session late last week, but lawmakers are returning to the Capitol to vote on reopening the government. House Speaker Mike Johnson, R-Louisiana, anticipates a vote to end the shutdown could come as soon as Tuesday.