The federal government shut down on October 1, 2025, after Congress failed to pass a funding bill for the new fiscal year. With no agreement in place, agencies across the country have scaled back operations, and hundreds of thousands of employees are off the job. About 750,000 federal workers have been furloughed, and many others are reporting to work without pay.

Economists estimate the shutdown could cost the U.S. up to $15 billion in lost GDP each week it continues. The House approved a stopgap bill to extend funding through November 21, but the Senate has been unable to reach the 60-vote threshold to advance it. Even if a deal is reached, it would be temporary, putting the government right back at another deadline in a matter of weeks. To help clients, prospects, and others, Dermody, Burke & Brown, CPAs has provided a summary of the key details below.

Who’s Affected?

The government shutdown has forced hundreds of thousands of federal employees off the job and disrupted operations across nearly every agency. Some departments are operating with only essential personnel, while others have suspended most programs until funding is restored.

Business lending, housing assistance, and labor data reporting are among the areas most affected. The Small Business Administration has stopped processing new loans, the Department of Housing and Urban Development has delayed grants and funding approvals, and the Department of Labor has paused the release of economic data. Contractors working federal projects are seeing delayed payments, and many research programs have been suspended for the time being.

Services deemed essential, such as air traffic control, law enforcement, and benefits administration, continue, but many agencies are operating with reduced staff. Social Security, Medicare, and Medicaid payments are still being processed; however, service levels are slower. National parks, museums, and other public sites have closed or reduced hours as the shutdown continues.

What’s Happening at the IRS?

The IRS has furloughed almost half of its workforce as the shutdown enters its second week, halting many of the services taxpayers rely on. For the first few days, all employees continued working under a short-term, five-day contingency plan, but it has now expired, and only essential workers remain on duty.

With limited staff, most taxpayer services are paused. Phone lines are closed, refunds and amended returns are not being processed, and responses to audits, appeals, and other correspondence are on hold until funding is restored. The IRS released a new contingency plan, but there is no update on how long these measures may last.

Despite the disruption, the October 15 filing deadline for taxpayers who requested extensions earlier this year remains in place, and electronic payments and filings are still being accepted. Taxpayers are expected to meet all filing and payment deadlines even while the agency is partially closed. 

Implications for Taxpayers and Businesses

• Taxpayers — Most IRS operations are paused. That means refunds, amended returns, and some audits are delayed until the shutdown is over. Most questions are not being processed. Even so, taxpayers are still required to meet filing and payment deadlines, including the October 15, 2025, extension date.

• Businesses — Companies waiting on tax credits, refund checks, or private letter rulings may face delays. Federal contractors may also see payments delayed. Additionally, many businesses are waiting on guidance regarding the many tax provisions within The One Big Beautiful Bill (OBBBA); guidance is not expected during this time frame, which will likely create some uncertainty going into year-end planning.

• Economy — Each week of the shutdown is a challenge for the broader economy. Furloughed workers may be spending less; business confidence may also begin to slip. Several key economic reports from agencies such as the Bureau of Labor Statistics are delayed, making it more difficult for policy makers and businesses to gauge economic conditions.

   

What Comes Next?

There is still no clear timeline for reopening the federal government. Congressional leaders have said they plan to continue negotiations, and until they reach an agreement, agencies will remain partially closed.

When agencies do reopen, they will likely have a backlog of work to get through. The IRS is expected to spend months catching up on returns and other compliance issues. In general, taxpayers and businesses will need to expect longer response times even after normal operations resume. Building extra time into year-end planning and financial schedules may help minimize disruptions once the government reopens.

Contact Us

The longer the government remains closed, the more widespread the effects become. What began as a legislative impasse is now a logistical and financial challenge for federal workers, taxpayers, and businesses. For now, the best course is to stay informed, keep records current, and prepare for a slower restart once the government reopens. Dermody, Burke & Brown, CPAs will provide additional updates when the situation changes. For additional information call 315-471-9171 or click here to contact us. We look forward to speaking with you soon.