Written by Arbo Team | Oct 7, 2025 2:00:01 PM
TLDR: The government shutdown exposes the IRS's dependence on ancient technology and a human workforce. Automated systems for e-filing and payments survive, but the COBOL fragility means any task requiring manual intervention - like paper processing, audits, or appeals - collapses. The result is a service vacuum that creates a massive backlog, increasing your business's risk of notices, penalties, and delayed financial clarity.
The Core Problem: COBOL and the Furlough Fragility
The IRS tax administration system is a financial engine with an ancient transmission. Much of its core programming is still written in COBOL (Common Business-Oriented Language), a technology that predates the moon landing. While it handles massive amounts of data efficiently, it is incredibly rigid and requires specialized personnel.
Here is the critical chain reaction during a shutdown:
- Furloughs Cut the Lifeline: A government shutdown mandates the furlough of "non-essential" staff. This includes those responsible for addressing the systemic issues that older technology creates, those who handle paper mail, manually resolve processing errors, and provide essential human services.
- The COBOL Choke Point: Automated systems for e-filing and electronic payments remain active. This is good, but any complex, non-standard, or error-ridden transaction, especially those coming in via paper, immediately hits a roadblock. Without the human staff to clear these processing exceptions, these transactions pile up, untouched.
- Paper Is Paralysis: If your business sent a payment, an amended return, or crucial correspondence via the mail, it is now part of the "pile of unopened mail". This is the most dangerous risk of the shutdown. That check, though timely mailed, may not be processed, leading to a potential Failure to Pay penalty. That response to a notice, though timely sent, may sit for weeks, allowing the issue to escalate on the automated side.
The Repercussions: The Service Vacuum and Backlog Tsunami
The resulting service vacuum isn't just an inconvenience; it's a significant risk management failure for your business.
- Delayed Audits and Appeals: The most immediate impact is the suspension or extreme delay of non-automated enforcement activities. Field examinations, correspondence audits, and crucial Appeals conferences are placed on hold. While this offers a reprieve, it guarantees a tsunami of work once the government reopens. The IRS will be playing catch-up for months, leading to rushed decisions and an overall drop in the quality and timeliness of service.
- Automated Notices and Escalated Collections: This is the ultimate operational paradox of the shutdown. While the human staff is gone, the automated notice generation systems are not. Your business may continue to receive automated penalty notices, collection demands, and intent-to-levy warnings, even though no one is available at the IRS to call, speak to, or manually intervene to resolve the underlying issue. It creates a Kafkaesque scenario where your rights are threatened by an unfeeling machine you cannot reason with.
- Uncertain Guidance: The teams responsible for issuing new regulatory guidance, ruling letters, and clarity on complex tax provisions (like R&D tax credits) are also furloughed. This stalls the essential information flow that tax professionals and businesses need to remain compliant, adding a layer of risk to major financial decisions being made right now.
When you boil it all down, this whole saga is a perfect illustration of what happens when a critical agency is forced to operate on outdated technology and an unstable budget. It's frustrating, yes, but it doesn't change your obligations. The only way to win this bureaucratic battle is to control your own process. Use this hiatus to finalize every piece of evidence, go entirely digital for all submissions, and build the kind of flawless paper trail that will let you sleep through the coming storm of backlogged notices. You cannot afford to be disorganized right now.