government shutdown impact on businesses

As the federal government shutdown continues, uncertainty grows for businesses and individuals alike. While news coverage often highlights the immediate effects on government workers and agencies, the shutdown’s reach extends far beyond Washington into tax operations, cash flow, and overall financial planning. For New York area business owners, this is a moment to protect liquidity, stay current on compliance, and prepare for slower responses from agencies and clients alike.

The IRS Is Still Open, But Only Partially

Even though many federal offices are closed, the IRS is still collecting taxes. Filing and payment deadlines have not changed, and interest and penalties will continue to accrue if payments are missed. Electronic filing and payment systems remain active, but much of the agency’s staff has been furloughed. That means delays in processing paper returns, responding to notices, and issuing refunds.

If you’re waiting on a refund or relying on tax credits, those funds may take longer to arrive, potentially tightening cash flow. Businesses that typically file amended returns or rely on IRS transcripts for financing should also expect slower turnaround times. In essence, the tax system is functioning, but it’s moving at half speed.

Now is the time to confirm that all electronic payments are scheduled, payroll deposits are current, and communication with both your internal and external accounting teams remain consistent. If your business receives IRS notices, don’t assume they can be ignored until after the shutdown.

Prepare for Cash-Flow Disruptions

Beyond taxes, a prolonged shutdown can disrupt everyday financial operations. Delays in government contracts, payments, or approvals can create a ripple effect, impacting businesses that rely on timely project funding or regulatory decisions. If you serve customers tied to public projects, education, healthcare, or regulated industries, you should expect to experience payment delays that can directly affect your receivables.

Take a construction company with a mix of private and government-funded work. When federal payments are delayed, its operating costs, including payroll, materials, and subcontractor payments, continue as normal. Even a brief disruption in reimbursement can strain cash reserves and force adjustments in project schedules, financing, or staffing.

Proactively managing cash flow is key. Review projections assuming delayed client payments and slower tax refunds. Strengthen internal controls on spending, and consider temporarily tightening credit terms with customers who may be exposed to government-related revenue streams. For some businesses, it may make sense to draw down an existing line of credit now, while liquidity remains strong, rather than waiting until cash gets tight.

How to Stay Ahead

File and pay taxes electronically. Avoid paper forms and mailed payments whenever possible to reduce lag.
Build in extra time. Expect delays in refunds, credits, and client payments, and adjust cash-flow forecasts accordingly.
Protect working capital. Maintain a minimum of a two-to-three-month cash cushion to weather unexpected slowdowns.
Monitor accounts receivable closely. Shorten collection cycles where possible and follow up on overdue invoices quickly.
Communicate with your financial partners. Keep your accounting team, lenders, and investors updated on potential disruptions or delays.

We Are In This Together

A government shutdown doesn’t stop taxes from coming due or bills from needing payment, but it does slow the systems that help everything run smoothly. Preparing now gives your business the flexibility to handle short-term disruptions without derailing long-term plans.

If you’re looking to strengthen your cash-flow plan, adjust tax schedules, or prepare for possible payment delays, we’re here to help you create a roadmap that keeps your business steady through the uncertainty.