How a Government Shutdown Impacts Accounting Firms — What to Expect & How to Prepare
Published October 9, 2025
Introduction
When Congress fails to pass a federal budget, many government agencies shut down until new funding is approved. For accounting firms, that creates ripple effects across nearly every area of their work.
The IRS faces staff furloughs, tax return processing slows, and clients grow anxious about delayed refunds or correspondence. At the same time, government-led modernization projects, including digital filing and automation initiatives, often come to a standstill.
A shutdown may be temporary, but its impact on firms and their clients can last weeks or even months. Understanding what changes, what stays operational, and how to communicate with clients during the disruption can make all the difference.
The IRS During a Shutdown
When a shutdown takes effect, the IRS operates at limited capacity. Many of its employees are considered nonessential and are temporarily placed on unpaid leave. During the current shutdown, Reuters reported that more than 30,000 IRS staff members were furloughed, leaving only essential workers in place to handle critical tax-related activities.
In practice, that means the IRS continues to process electronic returns and accept payments, but everything else slows considerably. Refunds take longer, audits may pause, and notices or amended filings can sit unaddressed. Firms should plan for delays across nearly all forms of correspondence and compliance work.
Taxpayer assistance centers and call lines often go unanswered. Appeals, rulings, and audit requests may also be delayed or suspended entirely. For many accounting firms, this creates bottlenecks that disrupt client deliverables and add uncertainty to project timelines.
Modernization and Innovation on Hold
The IRS has spent recent years investing in modernization and technology to make tax administration more efficient. Unfortunately, those efforts often pause when the government shuts down.
Technology upgrades to IRS systems, cybersecurity improvements, and digital filing initiatives lose momentum when project teams are furloughed. The Direct File pilot, which aims to simplify online tax filing for individual taxpayers, is one example of a project that could face significant delays.
Efforts to apply AI and advanced data analytics to fraud detection or compliance monitoring also stall during shutdowns. The Washington Post noted that when federal agencies close, they also stop publishing crucial economic data. That limits visibility not just for policymakers, but for accounting firms that rely on this data for forecasting and advisory work.
A prolonged shutdown can set back these projects by months, if not longer, as federal teams must re-prioritize and re-onboard once funding resumes.
The Ripple Effect for Firms and Clients
For firms, the effects of a shutdown reach well beyond delayed refunds. Clients depend on timely responses from the IRS for cash flow planning, financial reporting, and regulatory compliance. When those communications stop, firms must fill the gap with proactive guidance and support.
Uncertainty also affects client confidence. When deadlines are unchanged but processing times double, clients may fear penalties or question whether their accountants have done everything correctly. Firms that stay in front of these concerns with transparent communication will protect trust and credibility.
At the same time, a slowdown in compliance work opens space for advisory services. Clients facing delays often need help adjusting budgets, modeling liquidity, or recalibrating tax strategies. Firms that can step into this advisory role not only help clients stay calm, but also strengthen long-term relationships.
How Accounting Firms Can Prepare
No firm can prevent a shutdown, but there are several practical steps every firm can take to reduce its impact.
Communicate early and clearly.
Send clients an update as soon as a shutdown becomes likely. Explain what the situation means for refunds, audits, or response times, and provide estimated delays where possible. Clients appreciate knowing what’s going on, even if you don’t yet have all the answers.
Add flexibility to your deadlines.
Don’t commit to overly tight timelines when you know key IRS functions may be paused. Adding a few days of margin can help you avoid missed deadlines or rushed deliverables later.
Prioritize high-risk clients.
Focus your resources on clients with pending audits, payments, or deadlines that can’t be delayed. Routine or nonurgent projects can wait until normal operations resume.
Leverage outsourcing to maintain efficiency.
If staff capacity is stretched, outsourcing routine tax preparation or back-office tasks can keep your internal teams focused on client communication and advisory work. This also helps preserve productivity during times of government disruption.
Stay informed and adaptable.
Follow updates from the Journal of Accountancy and other professional sources. As government negotiations evolve, you’ll be able to adjust workloads and client expectations quickly.
Develop advisory offerings for uncertain periods.
Consider packaging services like refund delay analysis, tax scenario planning, or compliance risk assessments. These services help clients stay informed and demonstrate that your firm adds value even during disruptions.
A Note on Data and Policy Delays
Government shutdowns don’t just affect accountants. They also disrupt access to vital economic data. Agencies like the Bureau of Labor Statistics and the Census Bureau pause the release of reports on jobs, inflation, and consumer spending.
When these data streams go dark, firms lose access to the same macroeconomic indicators they rely on for planning and forecasting. This ripple effect can make it harder for firms to advise clients on investment, expansion, or budgeting decisions until normal reporting resumes.
Conclusion
A government shutdown is a reminder that even well-established systems can pause with little warning. For accounting firms, it means dealing with delays, navigating uncertainty, and guiding clients through the confusion.
Firms that communicate early, plan realistically, and stay informed will weather the turbulence far better than those that react after the fact. By turning disruption into an opportunity for stronger advisory relationships, accountants can help clients stay confident when the system around them stalls.
