This overview is designed for tax professionals, including CPAs and Enrolled Agents (EAs), providing a technical summary of the Internal Revenue Service’s Fiscal Year 2026 Lapse in Appropriations Contingency Plan. The plan outlines which essential activities will continue during a lapse, starting October 8, 2025, through April 30, 2026, encompassing the critical Tax Year 2026 filing season period.

Foundation and Authority for Continued Operations

The IRS Contingency Plan is formulated to comply with the Anti-Deficiency Act (31 U.S.C. §§ 1341 and 1342), which mandates the prohibition of obligations exceeding or anticipating appropriations, but recognizes specific exceptions.

For the expected duration of the lapse extending through April 30, 2026, 39,870 employees are designated as “exempt” (53.6% of the total workforce) and would be retained. These continuing activities fall primarily under three categories:

Category A1: Activities authorized by law and supported by non-expiring funds, such as multi-year or no-year appropriations. Multi-year funding available to the IRS will be utilized for the activities outlined in this plan.
Category A3: Activities necessarily implied by law based on imposed duties or authorities.
Category B: Activities necessary to safeguard human life or protect Government property.

Tax Filing Season Readiness and Return Processing

A core objective of the retained operations is preparation for the Tax Year 2026 filing season. Activities crucial to the onset and execution of the filing season will continue:

System Completion and Testing: The completion and testing of the upcoming Filing Year programs are designated as Category B activities and will continue.
Forms and Publications: Activities related to Upcoming Tax Year forms design and printing will continue (Category B). Tax Forms and Publications (TFP) personnel will ensure the timely development, completion, and release of tax forms, instructions, and publications necessary for taxpayers to file and remit taxes for current and upcoming tax years.
Return Processing (with Remittance): The IRS maintains the longstanding position that tax revenues constitute Government property which must be safeguarded. Therefore, activities related to Processing Remittances including Payment Perfection will continue (Category B). The Service may continue processing tax returns to ensure the protection of those returns that contain remittances, securing and protecting them against imminent loss.
Mail Operations: Mail Processing (remittances, etc.) is a Category B activity that will continue. Within Small Business/Self-Employed (SBSE) Collection, personnel will open incoming mail to identify documents required to be processed to protect the government’s interest during shutdown. Taxpayer Services’ Submission Processing Field Directors will process tax returns with remittances.

Implementation of Recent Legislation and Guidance

Tax professionals should anticipate that implementation work related to legislative changes, specifically Public Law (P.L.) 119-21 (sometimes referenced as the "One Big Beautiful Act"), will be sustained through excepted personnel:

High-Level Oversight: The IRS aims to ensure the timely implementation of P.L. 119-21. Executive staff in the Taxpayer Experience Office (TXO) are dedicated to P.L. 119-21 implementation and management of the Taxpayer Experience Vertical. The Chief, Taxpayer Services, will provide oversight of filing season activities, which includes preparation for the upcoming filing season.
Guidance and Policy: Within SBSE, the Commissioner’s office includes staff dedicated to P.L. 119-21 Implementation who will conduct necessary actions to implement tax provisions, including developing needed guidance to taxpayers and employees, creating or updating tax forms or publications, including worksheets and instructions, and responding to technical inquiries.
Energy Credits and Review: SBSE Examination positions are allocated to conducting necessary actions to support P.L. 119-21 implementation, including reviewing manufacturer registrations, dealer/seller registrations, and time of sale submissions via the ECO portal to ensure claimed credits are valid.
International Tax: Large Business and International (LB&I) staff will continue work related to the implementation of the international provisions in P.L. 119-21.

Protection of Taxpayer and Government Property: Statutes and Litigation

Activities necessary to protect government property, including the integrity of the tax administration process, are retained:

Statute Expiration: Protection of statute expiration, bankruptcy, liens, and seizure cases will continue (Category B).
Appeals and Case Protection: Appeals staff are retained to ensure the protection of statutes by performing tasks such as approving quick assessments for cases with imminent statutes, ensuring protection of statutes and shipping of imminent statute cases, and preparing necessary tax computations, Rule 155, or statements of account for Counsel on Tax Court cases with imminent statutes.
Litigation (Counsel): Chief Counsel manages pending litigation that includes time-sensitive filing of motions, briefs, answers, and other pleadings related to the protection of the government’s material interests. Counsel’s plan assumes that the Federal and District Courts will remain open, and litigation will continue uninterrupted. Positions are excepted on an "as needed" basis for personnel assigned to litigation scheduled for trial or having a court-imposed deadline within the plan timeframes.
Criminal Investigation (CI): The CI function, responsible for criminal law enforcement, retains 3,001 employees. These personnel are actively gathering evidence, conducting critical interviews, testifying in court proceedings, executing search warrants, and conducting arrests, requiring support staff to acquire, analyze, and preserve evidence. Maintaining criminal law enforcement and undercover operations is a Category B activity.

Impact on Taxpayer and Practitioner Interaction and Service

Tax professionals relying on typical non-Filing Season IRS functions must note the operational restrictions:

Cessation of Non-Excepted Services: Significant agency activities that will cease during a lapse include:
- Processing Non-Disaster Relief transcripts.
- Taxpayer services such as responding to taxpayer questions (call sites) (during Non-Filing Season).
- Legal counsel regarding non-excepted activities.
Representation (CAF/EIN): Accounts Management (TS) retains personnel to provide additional support for Centralized Authorization File (CAF) and Employee Identification Number (EIN) programs to assist with various issues, including the generating of tax returns.
Taxpayer Advocacy: The Taxpayer Advocate Service (TAS) retains 93 positions. Local Taxpayer Advocates (one per TAS office) are instructed to check mail, up to three days a week, to meet the IRS’s requirement to open and process checks while adhering to statutory requirements for maintaining confidential and separate communications. TAS staff will also monitor and ensure processing of cases where there is a statute or statute extension expiring that would put government property at risk (including statutes under I.R.C Sections 6501, 6502, and 6532). They will screen mail for incoming requests for Taxpayer Assistance Orders (TAOs) and notify the appropriate Business Unit.
Online Resources: The IRS.gov website will maintain operations, with Online Services (OLS) staff retained to support its continuing operation and to publish web content to support continued information distribution to taxpayers.

Critical Technology and Modernization Efforts

The Information Technology (IT) organization retains a large contingent of 4,552 employees, necessary to continue computer operations and prevent the loss of data.

Filing Season Systems: IT, specifically Applications Development (1,171 positions), is responsible for overseeing all planning, development, testing and deployment of production activities to ensure a successful Filing Season. This includes supporting application and web services operations necessary to provide critical systems support and manage code and testing.
Modernization and Taxpayer Accounts: The Enterprise Program Management Office (EPMO) focuses on modernization efforts. Retained personnel will provide executive oversight and administration of shutdown activities for critical accounts, including the Business Tax Account (BTA) and the Individual Online Account (IOLA). This staff manages contractors responsible for maintaining the taxpayer experience platform in support of legislative mandates and ensures the continuous execution of modernization objectives. The Tax Pro directorate also retains staff to provide oversight and support of contractors responsible for maintaining the taxpayer experience platform in integration support of legislative mandates with BOLA and IOLA.
Income Verification Services: The Income Verification Express Service (IVES) and Revenue & Income Verification Service (RAIVS) Photocopy Programs are Category A1 activities supported by non-expiring funds and will continue. IVES provides expedited return transcript, W-2 transcript, and 1099 transcript delivery services to the financial community.

Support for Tax Professionals (Return Preparer Office and Procurement)

Return Preparer Office (RPO): The RPO retains staff (8 positions) to provide contract support to exempt third-party contractor systems administered and monitored by RPO, noting that these contractors provide services to over 800,000 Tax Professionals.
Procurement and Contracts: Procurement staff (114 positions) are retained, primarily under Category A1 (reimbursable agreements) or A3 (implied authority), to provide support for the administration of continuing contracts and to award emergency contracts that may arise. They also support contract work for the Treasury Departmental Offices and the Bureau of Engraving and Printing. Tax professionals with contracts with the IRS should note that prime vendors will be notified via email to visit IRS.gov to check their contract status, and questions should be directed to the Procurement Lapse email account, Proc.Lapse@IRS.gov.

Prepared with assistance from NotebookLM.