With the shutdown entering its fifth week, the U.S. tax industry awaits information relating to recent tax law changes.
Concurrently, key events draw closer: the annual IRS efile shutdown, and the commencement of 2026 tax season.
Industry awaiting HR1 guidance that is not coming
Stateside this is causing immense difficulties for tax practitioners and taxpayers, who await guidance about changes under HR1.
Those changes include the mechanics of reporting under the new “no tax on tips, no tax on overtime” rules, and the new “Trump accounts”.
So far, the information has come as a trickle. The IRS has issued FAQs on Form 1099-K, FAQs on the Premium Tax Credit, and car loan interest relief provisions.
As with past shutdowns, this is all happening at a time when taxpayers and their advisors are dependent on the IRS for information. Information is needed for the entire U.S. tax industry to be able to plan and execute normal year-end reporting activities.
U.S. businesses, employees, payroll companies, accountants and others are especially affected, notably in the hospitality industry. With payroll obligations to meet, the longer the shutdown drags on, the more extreme the impact on these groups is expected to be.
The AICPA reported to the tax community on Friday about these issues. Sentiment is that there is so much uncertainty currently that it is creating anxiety for people playing all sorts of different roles in the industry, as the U.S. tax year end approaches.
Suffice to say, the industry, stateside, is feeling the impact.
Elements of the government are still working – including some departments within the IRS
Operationally, 46% of IRS employees were furloughed from October 8th.
1400 employees then received a 60-day notice that their employment will end on 9 December 2025.
45 IRS Chief Counsel employees were recalled to work last week to prepare HR1 guidance.
The IRS has commented that guidance will be out in November.
The Practitioner Priority Service is operating; however, call answering times vary immensely.
Not only are call wait times an ongoing pain point for accountants and taxpayers but frequently issues also cannot be resolved over the phone. Where the taxpayer or representative must write a letter to the IRS to progress resolution, the issue is not going to be addressed without delays.
Other problems arising including no-shows by the IRS for scheduled audit calls with practitioners and their client.
Whilst notices are still being issued to taxpayers, frequently they contain errors – causing enduring problems for taxpayers and their advisors.
There are already many challenges when dealing with the IRS, let alone when there is a government shutdown.
Reduced operations only magnify the problems that were already there to start.
Previous government shutdowns have impacted the following year’s tax season for a variety of reasons
The U.S. tax industry annually anticipates a number of milestones. Two of these milestones are the annual IRS efile shutdown, and the start of the new tax season. For individual returns, this event usually occurs in mid-November. For business returns, this occurs sometime in mid-December each year.
Efile shutdown indicates to the industry that the IRS and the Treasury are implementing changes required to forms that taxpayers complete and file. Changes arise as a result of normal year end rollover to a new tax year, and changes in tax law. Currently there has been no information from the IRS as to when IRS efile will shut down for 2025. This event is also important because the timely start of the new tax season is reliant on these year-end changes being implemented during efile shutdown.
With respect to the overall shutdown, taxpayers filing paper returns risk lengthier delays than normal. Relatedly, delays in processing refund checks due to taxpayers filing for a refund without a bank account number on the return, are also anticipated to occur.
Backlog
Should the current situation continue the AICPA estimates there could be up to 600 million letters for the IRS to process after operations are fully reinstated.
That’s triple the backlog post-pandemic, which landed at 200 million letters the IRS received for processing.
The AICPA has made appropriate recommendations in its comment letters that believes are fair, tangible, and can be implemented by the IRS at this time. Through those recommendations the AICPA is advocating to protect taxpayers’ rights from the fallout of the current situation.
FAQs:
1. Who is the AICPA?
The largest organization of professional accountants in the United States.
Partnered with the Chartered Institute of Management Accountants, to form the Association of International Certified Professional Accountants.
They work with U.S. government agencies including the SEC, collaboratively, they are the voice of U.S. tax practitioners.
They advocate for the tax profession.
2. What were the recommendations in the comment letters?
Discontinue compliance actions, maintain all online systems and accounts, offer a streamlined reasonable cause penalty waiver, and provide targeted estimated and late payment penalty relief.
3. How does AICPA influence tax policy?
The AICPA influences tax policy through technical expertise, and legislative advocacy.
4. What are the key concerns of the AICPA?
The key concerns are the under-resourcing of the IRS to properly and fairly administer the U.S. tax system, leading to ongoing problems, notably delays, a backlog of taxpayer information for processing, and the impact on the 2026 tax season.
5. What is the IRS Contingency Plan?
The IRS Lapsed Appropriations and Contingency Plan released by the IRS on September 26, 2025, updated on October 8, Classified IRS employees into critical and noncritical in preparation for government shutdown due lack of funding. The full document is available here.
6. What impact does this have on international taxpayers?
All filers of U.S. tax forms and others dealing with the IRS, including U.S.citizens, resident aliens, nonresident filers, US corporations with foreign operations are affected in the same way that domestic filers are.
7. What is the IRS doing to alleviate these issues?
The AICPA reported last week that IRS is considering AICPA recommendations in its comment letters.
Recommendations
1. Any person or entity intending to file a U.S. tax return electronically should file as soon as possible. Individuals should expect IRS efile to no longer be available from mid November for the annual efile shutdown. Businesses should expect efile to shutdown by mid December 2025.
2. Filers expecting a refund by filing a U.S. tax return should, where possible, enter a U.S. bank account number on any U.S. tax – before submission.
This is so the IRS will directly deposit the refund into the account on the return. Once a taxpayer files their U.S. tax return return there is no way to then inform the IRS of an account number – except through filing an amended tax return with the account details on the amended return.
3. Individuals who qualify to open an online IRS account should do so, in order to access current balances, obtain transcripts, view notices, and perform a range of other functions.
4. IRS notices should be replied to by the recipient or their representative, even though the IRS is not fully operational.
5. Expect delays in responses to letters sent to the IRS.
6. Abide by the law. The IRS has reminded the industry that tax rules remain in force irrespective of the shutdown in a statement issued on October 21st, 2025.
Acknowledgments
The writer wants to acknowledge the AICPA for the information provided in this article, and also the continuing support to all members of the profession.
