The threat of a government shutdown appears to be receding Friday, but the IRS would nevertheless still operate during tax season, even at lower capacity, in the event of a shutdown.

“During a shutdown, the IRS operates with a limited workforce,” said Misty Erickson, a tax content program manager at the National Association of Tax Professionals. “While e-filed returns may continue to be processed, paper returns and those requiring manual intervention could face delays.​If there is a shutdown, filing electronically can help ensure there is no delay in return processing.”

IRS acting commissioner Melanie Krause sent an email to employees on Thursday telling them they would be exempt from furloughs “due to existing appropriations,” which apparently come from the Inflation Reduction Act, according to a newly updated contingency plan from the Treasury Department. The IRS would be able to operate fully staffed for at least five days. However, the continuing resolution that was largely passed by House Republicans and that the Senate needs to pass by Friday night with the help of some Senate Democrats would cut another $20.2 billion in funding from the IRS funding under the Inflation Reduction Act, after two successive cuts of over $20 billion in the past two years. 

Amid the uncertainty, the Treasury released a reassuring statement. “The Treasury put out a statement that if there were a shutdown, they were going to fund the IRS through April 30, with all of it 100% open, which means it would not cause a problem for the filing season. But then after April 30, the IRS would go to zero,” said Tax Guard CEO Hansen Rada. 

Erickson believes that tax refunds would continue to be processed, even if there were a shutdown. “In prior shutdowns, for example, the 2019 shutdown, the IRS announced it would process tax returns and provide refunds as scheduled, even amidst the funding lapse,” she said. “Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 U.S.C. 1324), and the IRS has consistently believed that it has the authority to pay refunds despite a lapse in annual appropriations. Assuming Congress follows suit, there should be minimal impact as long as a return does not stop for review.”

However, with all the staffing cutbacks in recent weeks at the IRS, taxpayers and tax professionals are feeling worried. The IRS is said to be planning to lay off up to half its workforce and has already cut between 6,000 and 7,000 employees. However, on Thursday,a federal judge ordered the Trump administration to reinstate employees at the Treasury Department and five other departments.

“There’s certainly a lot of uncertainty and a lot of anxiety about whether the Service is going to have the manpower to provide the kind of customer service that they have in recent years,” said Anne Gibson, a senior legal analyst at Wolters Kluwer. “There’s an order saying to reverse some of those firings. On the other hand, a lot of people have already been gone for quite a while from the office, and the ruling did say this doesn’t mean there can’t be reductions in force if they’re done properly. So the firings that have already happened that violated the terms that they were supposed to have, those need to be reversed. But we’ve seen that there’s already plans being talked about for further layoffs at the IRS. I’ve seen people saying they’ve heard 50% being let go at some point in the future.”

Tax professionals are trying to reassure the public about filing their tax returns, despite the turmoil this tax season. “So far, it’s going smoothly,” said Alison Flores, a manager with the Tax Institute of H&R Block. “What we do want to encourage everyone to do is file on time. So if you need to file a return, you want to try to file by April 15. Most people are owed refunds from the IRS. Go ahead and get that return in. If you’re a person who owes taxes, you also want to file. The penalty for failure to file is actually larger than the penalty for failure to pay.”

In case there are service disruptions, the NATP has some advice for taxpayers. “If they plan to file a return on paper, consider using a software service or tax professional to file it,” said Erickson. “E-filed returns should be processed as usual. Take time to compare last year’s return and informational documents to what you have this year. This allows you to double-check that you have everything before you file. We know there are delays with some forms this year, so filing early without that information will cause a problem.”

More than 1.1 million taxpayers nationwide are still owed unclaimed refunds for tax year 2021, but they only have another month to submit that year’s returns.

The Internal Revenue Service estimates that $1,025,336,800 in refunds remain unclaimed by 1,142,000 taxpayers who have not filed their 1040 for the 2021 tax year. The deadline for filing to claim these refunds is Tax Day, April 15.

The median refund is an estimated $781, which does not include the Recovery Rebate Credit or other credits. California and Texas have the most taxpayers still owed a 2021 refund, followed by New York and Florida. Median unclaimed returns are highest in New York ($995), Pennsylvania ($993), Rhode Island ($946) and Massachusetts ($936).

Current and prior-year tax forms are on the IRS.gov Forms and Instructions page or can be obtained by calling (800) 829-3676.

The Trump administration has been rapidly backing away from the various green energy incentives offered under the Biden administration, starting with a pair of executive actions that President Trump signed on the day of his inauguration, and continuing through sweeping deregulatory changes announced by the Environmental Protection Agency this week.

Trump signed the Unleashing American Energy executive order on his first day in office, ordering federal agencies to pause all disbursements under the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. That same day, he signed another executive order, Regulatory Freeze Pending Review, suspending the development of new regulations and preventing the publication of any pending regulations until they are reviewed for compliance with the new administration’s energy policy.

Since that time, the Senate confirmed former New York Republican congressman Lee Zeldin in January as EPA administrator, and on Wednesday he announced what he called “the greatest day of deregulation our nation has seen,” saying he was “driving a dagger straight into the heart of the climate change religion” while rolling back trillions in regulatory costs and “hidden taxes.”

However, tax professionals are wondering about what is going to happen with all the various tax incentives their clients had counted on from the Inflation Reduction Act and other sources.

“Obviously we anticipated different energy policy goals under this incoming administration than we had under the Biden administration, so we’ve been bracing to see what happens,” said Jess LeDonne, director of tax technical, policy and legislative affairs at the Bonadio Group in Rochester, New York, during an interview in late February. “And this executive order is certainly a signal of what to expect going forward, but I would say we’re still in a little bit of a wait and see [period], because this executive order is really just a pause right now on the disbursement of funds under the Inflation Reduction Act and also the bipartisan infrastructure law as well.”

She noted that one of the executive orders directs the agency to pause disbursement of funds under those laws for 90 days, and in those 90 days to create a report and submit a report to the White House Budget Office, essentially demonstrating that the spending aligns with the new administration’s energy policies. 

“In this 90-day hold period, there’s no disbursements of funds under those laws,” said LeDonne. “What this means long term right now is just a pause. Those laws are still the law. The Inflation Reduction Act has not been repealed. That would require either congressional action or judicial action stating that the law is unconstitutional. That law cannot be undone by executive order.”

However, this is still creating uncertainty for clients who have invested in green energy sources at their businesses and homes.

“What we are seeing with our clients is certainly uncertainty around what this means, if this is an indication of a broader intention under the new administration to roll back green energy incentives,” said LeDonne. “There is objective uncertainty for them for long-term planning.”

Some clients have already embarked on projects and are wondering whether they will be able to claim the tax benefits they were promised under the Biden administration.

“We certainly have clients who have already completed projects,” said LeDonne. “We have clients who have projects underway. There’s all different points in this life cycle, and if and when anything does change other than this pause, my first question will be, what’s the effective date of that change? If something does happen congressionally that would undo these incentives, when does that change take effect? Is it 60 days after that law passes? Are they going to try to go retroactive to the beginning of this year? We have conversations with our clients about when they invested in these projects, when the projects went online, what those dates are, so that we can monitor the legislation and see if any changes actually impact that.”

The biggest uncertainty for clients right now is longer-term planning. “If you’re maybe a developer or someone in the construction industry, and part of the project is planning for a geothermal or solar energy offset for the project cost, that’s where right now there’s maybe a hesitation, given these changes under the new administration, that might give pause to spending that money,” said LeDonne. “In the past, you may have been able to more confidently rely on some investment offset from the government.” 

Clients are unsure if they will be able to recoup the costs they have invested in green energy projects, even though the political lines aren’t always so clear, as many Republican-leaning states also have large-scale projects underway. Around 80% of the manufacturing investments from the Inflation Reduction Act are in Republican congressional districts, according to The New York Times.

“It’s tempting to think about these green energy incentives as a really partisan issue down party lines, and I would say it’s really not that clean because there are certainly Republican lawmakers and Republican states and Republican districts that utilize Inflation Reduction Act incentives very heavily,” said LeDonne. “There are some Republican lawmakers that have constituents that utilize these programs, and therefore maintaining these green energy incentives is actually a really important policy for a lot of Republican lawmakers.”

Much will depend on the timing. “It really depends on a client’s fiscal year when they’re filing, when the project took place,” said LeDonne. “But for right now, if money has been spent under the law as it currently stands, if there’s eligible spend that can be offset by tax credits, we’ll certainly help our clients claim those. If something were to change retroactively, there may be the need to amend.” 

She pointed out that even if the federal tax incentives for green energy are repealed, many states will still offer them. “It’s not that all of this money is going away and there’s not going to be any green energy incentives,” said LeDonne. “We’d certainly look to the state and other potential funding mechanisms too. We’ll keep an eye on it. But right now, there is some uncertainty. Short term, all we have right now is this pause, the 90 days, and that will be up on April 20. Thereafter, we’ll see what happens, based on the agency reports around this funding, and thereafter what occurs.”

The Inflation Reduction Act and the infrastructure law nevertheless remain in place, even if they’re amended at some point or if the Trump administration keeps refusing to pay the disbursements. 

“It is important to know that right now this is a pause. Those laws are still the laws, and those credits still exist,” said LeDonne. “It’s simply that right now they cannot be paid out. Of course, paying out federal incentives, funding anything, is not something that happens quickly anyway. Right now, this pause might not directly really impact too many people, but we’re certainly monitoring to see if this is the canary in the coalmine, so to speak, that’s really indicating a broader intention by the new administration to undo some of these green energy incentives.”