The IRS shutdown comes at one of the worst possible times for US business owners and entrepreneurs—on the heels of the Republican tax package becoming law with its many business-owner and high-earner benefits. But for those with foresight and solid tax strategy, it offers unique opportunities.
Nearly half of the IRS’s newly hired workforce is now furloughed, meaning the agency’s processing power has slowed to a crawl. Refunds are delayed, correspondence is backlogged, and examiners are scarce.
For business owners operating multiple entities (LLCs, S corporations, and partnerships), that slowdown isn’t just an inconvenience. It can affect tax planning, cash flow, and investment decisions that depend on timely tax outcomes.
For entrepreneurs juggling multiple ventures, liquidity and timing are everything. The IRS’s slowdown injects unpredictability into both.
Refunds delayed by months can disrupt cash flow, especially for small and mid-sized businesses that rely on those funds for operations or reinvestment. And delayed processing of elections, such as S corporation conversions or retirement plan deductions, can push compliance into future quarters, compounding exposure.
The rules haven’t stopped applying, either. Statutes of limitations on assessments still run, required filings still must be made, and penalties for noncompliance haven’t been suspended. The difference is that response times have stretched, and guidance has stalled.
In that vacuum, proactive strategy replaces reactive compliance. While many taxpayers will simply wait for the agency to get back to normal, business owners and entrepreneurs have a better option. They can use this downtime to fortify their financial defenses, identify missed opportunities, and prepare for the inevitable IRS catch-up phase.
Frozen in Time
The IRS’s core systems are still running, but its people aren’t. While automated collection notices continue to go out, the human infrastructure to handle responses and appeals has dramatically thinned. Trying to close out fiscal-year tax planning or finalize partnership allocations? This slowdown creates a widening gap between compliance and clarity.
Paper-filed returns are stuck in queues, amended filings have slowed, and even some electronic filings are delayed. The IRS’s ability to process claims for overpayment or credit carrybacks has plummeted. For many business owners, that translates into idle capital—money that could be reinvested, deployed into payroll, or into expansion.
This paralysis extends to guidance and interpretation. Delays in IRS rulings, form updates, and procedural guidance mean that advisers can’t always get real-time clarity on complex strategies such as cost segregation studies to research and development credit elections or qualified opportunity zone reinvestment. That uncertainty can disrupt otherwise sound tax strategy planning and implementation, which happen long before the filing and net major benefits.
Strategy Doesn’t Stop
The tax code hasn’t changed—only the agency’s ability to enforce and process it has. And that distinction matters.
Sophisticated taxpayers who engage in proactive, year-round planning still have tools to protect their wealth and optimize their tax exposure, even when the IRS isn’t picking up the phone. In some cases, the slowdown may actually offer a temporary reprieve from scrutiny, giving strategic taxpayers more time to prepare, document, and strengthen their positions before the IRS catches up.
As an example, for high-net-worth entrepreneurs with multiple entities or complex partnership structures, the slowdown in examinations and correspondence provides breathing room to perfect documentation for advanced strategies. Think management fee structures, transfer pricing positions, or intra-entity loans—the kinds of red flags that typically draw IRS review or demand substantiation upon filing to reduce the chances of an audit.
Likewise, those implementing depreciation or cost segregation studies can use this window to ensure substantiation is airtight. When examiners ultimately return to work, documentation will be the deciding factor between tax savings that stand and those that get clawed back.
Strengthen, Don’t Stall
Business owners should view this period as a planning pivot rather than a pause. Delays in IRS responsiveness mean year-end tax strategies must be implemented and substantiated well in advance. That includes verifying partnership allocations, reconciling distributions, and finalizing 2025 estimated tax payments.
Entrepreneurs with multiple entities should ensure intercompany transactions are properly priced and documented. These steps don’t require the IRS, but they do require discipline.
This is also the ideal time to conduct a forensic tax assessment, a deep review of prior filings and entity structures. Many taxpayers find that past overpayments, misclassified deductions, or missed credits can be reclaimed through amended returns or refund claims.
Those claims will take longer to pay out, but the IRS owes interest on delayed refunds beyond statutory timeframes, currently around 7%. Patience, in this case, can literally pay dividends.
For those facing audits or ongoing disputes, the slowdown creates a tactical advantage. Additional time to compile evidence, coordinate expert valuations, or reconcile records can materially strengthen a taxpayer’s defense. The IRS may move slowly, but it rarely forgets—and when it resumes, well-prepared taxpayers will be positioned to respond effectively.
The Bottom Line
The IRS shutdown exposes a fundamental truth about US taxation: Those who plan ahead remain in control, even when the system doesn’t. Tax strategy is about structuring your financial life so that when political, economic, or bureaucratic disruptions occur, your wealth remains shielded, and your plan stays intact.
The IRS eventually will reopen its doors, restart its audits, and release its backlog of notices. When that happens, those who have used this moment wisely—by refining their structures, verifying their documentation, and tightening their strategy—won’t just survive the disruption. They’ll come out of it stronger.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Michael Moffa is the founder of Prosperity Tax Advisors, a wealth and tax strategy firm based in Tampa, Fla.
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