As the federal government enters a shutdown, payroll professionals face a series of potential challenges that could affect compliance and operations. While electronic tax filings and deposits are expected to continue, the IRS warns that paper processing, amended returns, and taxpayer assistance will likely experience delays.
The agency plans to keep its workforce active for at least five business days using Inflation Reduction Act funds, but prolonged funding gaps could slow the issuance of tax guidance and impact the upcoming filing season.
Employers should anticipate disruptions to E-Verify, the federal employment eligibility verification system, which is unavailable during the government shutdown. While completion of Form I-9 remains mandatory, employers must create E-Verify cases once the system is restored.
In an October 1, 2025, notice, the Department of Homeland Security (DHS) confirmed that E-Verify is offline. Employers cannot access their accounts, and customer support services are also unavailable. DHS stated that employers using an alternative authorized procedure for remote examination of Form I-9 documents may continue doing so, provided they remain enrolled and in good standing with E-Verify during the lapse in DHS appropriations.
Employees are unable to resolve Tentative Nonconfirmations (mismatches) during the shutdown. Those with a Social Security Administration (SSA) mismatch must wait until E-Verify resumes operations before visiting an SSA office to resolve the issue.
Other ripple effects include possible delays in the Bureau of Labor Statistics’ employment reports and uncertainty for federal contractors, who may face furloughs or payment delays.
On PayrollOrg’s “The Payroll Community” forum, a payroll professional raised concerns that the federal shutdown could delay guidance on the One Big Beautiful Bill Act’s “no tax on overtime” provision. While the IRS and Treasury have released some guidance on the Act’s “no tax on tips” provision, no substantive updates have been issued regarding the overtime exemption.
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