IRS Furloughs Nearly Half Workforce Amid Government Shutdown
The Internal Revenue Service (IRS) announced on Wednesday that it has furloughed nearly half of its employees as the federal government shutdown enters its eighth consecutive day. Approximately 34,000 IRS workers were placed on furlough, with just over 39,870 employees, or 53.6% of the workforce, continuing their duties as exempt or excepted personnel.
The shutdown has halted most IRS operations, forcing a significant reduction in the agency’s capacity to perform essential tax-related functions nationwide. This disruption follows unsuccessful attempts by the Senate to pass funding resolutions aimed at ending the shutdown for the sixth time.
“Due to the lapse in appropriations, most IRS operations are closed,” the agency stated in an internal message to employees. “An IRS-wide furlough began on October 8, 2025, for everyone except already-identified excepted and exempt employees.”
Employees not classified as exempt or excepted have been placed on a non-pay, non-duty status until further notice. Despite furlough status, all employees have been instructed to prepare to report for their next scheduled work period once operations resume.
Back Pay Assurances Amid Uncertainty
Furloughed IRS workers received a letter confirming they will receive back pay once the shutdown concludes. This assurance came a day after an internal draft memo suggested potential administration hesitance regarding back pay obligations for some furloughed employees.
Context: Workforce Reduction Challenges
The furloughs exacerbate ongoing challenges at the IRS, which has already experienced a 25% reduction in its workforce since January 2025. The agency’s employee count dropped from approximately 100,000 to 75,000 following mass layoffs implemented after President Donald Trump’s return to the White House.
FinOracleAI — Market View
The IRS furloughs amid a prolonged government shutdown highlight the fragility of federal operations under funding impasses. The agency’s reduced workforce and halted operations could delay tax processing and enforcement, impacting government revenue streams and taxpayers’ compliance timelines.
- Opportunities: Potential legislative resolution could restore IRS operations and workforce stability, improving tax administration efficiency.
- Risks: Prolonged shutdown may deepen operational backlogs, reduce tax revenue collection, and erode public confidence in federal tax services.
Impact: The furloughs represent a negative market and operational impact, reflecting broader risks of government funding stalemates on critical federal agencies.
