Federal Budget Deal Avoids Tax Season Disruptions

White House and congressional negotiators reached an agreement on funding the federal government ahead of a midnight April 8 deadline and averted a shutdown of all nonessential government functions.

Under the agreement, the federal government will be funded by a continuing resolution through April 15. By then, Congress plans to pass the agreed-upon budget and send it to President Barack Obama for his signature.

If the government had shut down, nonessential personnel would have been furloughed for the duration of the shutdown. Last week, IRS Commissioner Doug Shulman estimated that as many as 100,000 IRS personnel would have been furloughed.

On Friday, the IRS issued its long-awaited contingency plan for how it would operate if the federal government did shut down. Under that plan, the Service would have continued to process e-filed returns, but paper returns would not have been processed during the shutdown. The IRS would also have continued to process payments accompanying both paper and electronic returns.

Many other IRS functions would have closed, including the walk-in taxpayer assistance centers and telephone assistance for non-1040 returns. Examinations, collection, Appeals, and Taxpayer Advocate appointments would have all been canceled.

With the shutdown averted, tax season should continue as normal. Through March 25, the IRS reported that it had received just over 82 million returns this season, and 71 million have been e-filed.

The federal government last shut down in 1995, when there was a full shutdown for five days and also a partial shutdown for three weeks.