IRS Still Fining Late Taxpayers Despite Shutdown — What You Need to Know Before It’s Too Late

When the government shuts down, most people think everything stops — but not the IRS. Even with offices closed and workers on leave, the IRS is still enforcing penalties for anyone who misses tax deadlines. Many taxpayers are surprised to learn that the government shutdown doesn’t mean a break from filing taxes.

If you got an extension earlier this year, your new deadline was October 15. Missing that date can still lead to big penalties, even if the IRS is not fully open. Here’s what’s really going on, what the rules mean for you, and how to protect yourself from extra costs.

Why the IRS Still Enforces Penalties During a Shutdown

A government shutdown means some federal employees are temporarily out of work because Congress hasn’t approved the budget. But certain parts of the government must keep running — especially those related to collecting money.

The IRS falls into that group. Even when many workers are furloughed, key systems stay online. Tax filings, payments, and automatic penalty calculations continue to operate electronically. That means if you miss a deadline, the penalty system still activates.

In other words, the shutdown might slow down refunds or customer service, but it doesn’t pause your tax responsibilities.

The October 15 Deadline Still Counts

If you filed a tax extension back in April, that extra time ended on October 15. The IRS made it clear: even though much of the agency is closed, the tax deadline didn’t change.

Anyone who didn’t file their 2024 return by October 15 now faces potential fines. This includes people waiting on documents, dealing with accountants, or assuming the shutdown would pause penalties. Sadly, that’s not the case.

The government may be on pause, but the IRS’s computer system is not.

How IRS Penalties Work

There are two main penalties the IRS uses for late filers:

1. Failure-to-File Penalty – This is 5% of the unpaid tax for each month your return is late, up to a maximum of 25%.
2. Failure-to-Pay Penalty – This adds 0.5% per month to any tax you owe and haven’t paid yet.

That means even a short delay can get expensive. For example, if you owe $10,000 in taxes and file two months late, your penalties could reach several hundred dollars — and that doesn’t include interest.

These fines keep adding up until you file your return and pay your balance in full.

Why the IRS Still Collects During a Shutdown

The IRS’s job is to collect money to fund government operations. So, even when some services stop, the systems that bring in revenue keep going. Taxpayers can still e-file returns, make payments online, and use the IRS website.

However, services like phone support, refund checks, and correspondence may take longer. You might not be able to reach an IRS representative right away, but the agency’s computers are still tracking deadlines and payments.

In short, the IRS doesn’t take a vacation — even when Washington does.

How to Avoid IRS Penalties

If you missed the October 15 deadline or think you might owe, don’t panic — there are steps you can take.

1. File as Soon as Possible

Even if you can’t pay your full balance, file your return now. The failure-to-file penalty is the biggest one, so getting your paperwork in reduces what you owe.

2. Pay What You Can

You can send a partial payment online at IRS.gov/payments. Paying even part of your balance lowers future penalties and interest.

3. Request a Payment Plan

If you can’t pay in full, you can apply for an installment agreement. This spreads your payments over several months, helping you avoid more severe penalties.

4. Ask for Penalty Relief

The IRS sometimes removes penalties if you have a good reason, like serious illness or a natural disaster. This is called First-Time Penalty Abatement or Reasonable Cause Relief.

5. Keep Records

If you’ve been affected by the shutdown (for example, if it delayed your refund or access to records), keep documentation. It may help your case if you later ask for relief.

Common Myths About the IRS During a Shutdown

Many people misunderstand what happens when the government shuts down. Let’s clear up a few myths:

• ❌ Myth: “The IRS is closed, so I don’t have to file.”
  ✅ Truth: Electronic systems are still active, and deadlines are still enforced.
• ❌ Myth: “Penalties won’t apply until the government reopens.”
  ✅ Truth: Penalties start counting the day after your deadline passes.
• ❌ Myth: “I can’t make payments until the shutdown ends.”
  ✅ Truth: You can still pay online or by mail.

What Happens If You Ignore the Deadline

If you completely ignore your taxes, the IRS can eventually file a substitute return for you — but it won’t include deductions or credits you’re owed. That usually means you’ll owe more money.

Then, the IRS can start collecting through wage garnishments or liens on property. These actions take time, but they do happen, even during shutdowns. It’s better to act early and stay in control.

How Businesses Are Affected

It’s not just individuals who face penalties. Businesses that missed their deadlines — like partnerships or S-corporations — can also get hit with fines for each month their return is late.

Even small businesses that rely on tax credits may see delays in processing refunds or credits, which can hurt cash flow. That’s why staying up-to-date on filings is essential.

The Bottom Line

The IRS may be slowed down by the government shutdown, but penalties haven’t stopped. If you filed for an extension, make sure your 2024 tax return was submitted by October 15. Missing that date can lead to growing fines, interest, and stress.

The best thing you can do is file right away, even if you can’t pay in full. Use the IRS’s online tools to make payments or request a plan. And if you truly couldn’t meet the deadline for a good reason, ask for penalty relief.