Written on October 28th, 2025
Update: The 2025 Government shutdown ended on November 12, 2025. This shutdown lasted 43 days, making it the longest in history.
The federal government shut down on October 1, 2025, and it’s creating uncertainty across the board for businesses, taxpayers, and the broader economy. If you’re wondering what this means for your tax refund or how it’ll hit your bottom line, you’re not alone.
TL;DR: The IRS kept operating normally for the first week of the shutdown, but then began scaling back, furloughing roughly half its staff and pausing some operations. The IRS is encouraging individual filers to file electronically with direct deposit, IRS customer service is greatly curtailed, and businesses dependent on federal spending should brace for continued disruptions amid the ongoing deadlock.
Will The Government Shutdown Impact When I Get My Tax Refund?
If you filed for a six-month extension back in April, you still need to file by October 15th. That deadline hasn’t changed. If you missed the deadline, file as soon as possible.
As mentioned, IRS services are now facing major disruptions. After October 8, the IRS pivoted to an updated contingency plan and furloughed roughly 34,000 employees (about half its workforce) until funding is restored. This means many “non-essential” operations are on hold. Tax returns (especially e-filed ones) are still being processed and refunds are still going out via automated systems, but expect delays if any part of your return requires manual review or correspondence.
Here is an important statement from the IRS, released on October 21st: “Tax refunds will generally not be paid during this period with one key exception. For taxpayers filing a Form 1040, refunds will continue to be paid on electronically filed, error-free tax returns that can be automatically processed and direct deposited. The IRS urges individual taxpayers to file electronically with direct deposit to avoid delays.”
How Will IRS Customer Service Be Impacted by the Shutdown?
The IRS started this year with about 100,000 employees but lost more than 25% of its workforce between January and May, meaning they were already running lean. Now that the IRS is in the furlough phase, only critical systems (like e-filing and automated refund processing) remain active, and live phone support is largely unavailable.
Should I Still File?
Tax filing deadlines remain unchanged and taxpayers must still meet obligations despite the shutdown.
How Does This Government Shutdown Hit the Economy?
An estimated 750,000 federal workers are currently furloughed, and hundreds of thousands more are required to continue working without pay. That’s likely well over a million people suddenly dealing with income uncertainty. As they reduce spending, consumer confidence drops, and markets get jittery; impacting everyone (not just those who work for the government).
The ripple effects go way beyond just their paychecks. Government contractors can’t work, creating cash flow nightmares for businesses counting on federal projects.
What Should Business Owners Be Thinking About?
Government Contracts
If you’re working on federal contracts, you’re already feeling this. Payments might get delayed and projects could pause indefinitely. Review your contract terms now and communicate proactively with other clients about potential impacts.
Economic Uncertainty
Even businesses with zero federal ties should pay attention. Shutdowns create broader economic slowdowns. When over a million workers tighten their belts, that affects retail, restaurants, services… pretty much everything. Plan for potential revenue dips.
SBA Loans and Services
SBA loans are currently paused. The SBA estimates that $170M in loans are being paused daily.
Final Thoughts
As of October 28th, Washington has yet to break the deadlock. In the Senate, attempts to pass stopgap funding have failed repeatedly, which is a sign that this could drag on for weeks. The initial five-day “grace period” for the IRS is long over: the IRS has now paused most operations and furloughed tens of thousands of employees. They haven’t announced any further special measures beyond urging people to file by the normal deadlines. In short, there’s no telling when normal service will resume.
Unfortunately, it doesn’t seem like there will be a quick resolution, so staying flexible is key. Keep some cash reserves on hand if you can, tighten up your contingency plans, and pay attention to new developments. At some point this will end, and when it does, you want to be ready to hit the ground running. Until then, hang in there, and let’s all hope our leaders find a way to resolve this soon.
