Partial Government Shutdown In Force But Likely to Last A Few Days

For the second time in less than two and a half months, the federal government has shut down. Congress failed to pass the necessary appropriation bills to fund agency operations by the mandated deadline.

However, this is a partial shutdown that should last only a few days and should only have limited impact, as compared to the record 43-day full shutdown from October 1 to Nov. 12, 2025.

The Senate did pass five appropriation bills (six of the 12 had previously passed and been signed into law) before the deadline and had negotiated a two-week continuing resolution to fund Homeland Security to allow further negotiations to address concerns with Immigration and Customs Enforcement (ICE).

The House of Representatives, which is returning from a weeklong recess, needs to approve the newly passed Senate bills, and once signed by the president, the partial shutdown will end. Here is where the appropriation bills stand:

Three appropriation bills — Military Construction and Veterans Affairs, Legislative Branch, and Agriculture, which includes the FDA and the oversight of SNAP benefits — were signed into law in November 2025. That helped end the previous shutdown.

On Jan. 23, 2026, the president signed into law bills to fund Commerce, Justice, and Science; Interior and Environment; and Energy and Water.

The six remaining appropriations the House passed were Financial Services/General Government, the State Department/Foreign Ops, as well as a large bipartisan bill to fund the remaining departments: Defense, Labor/Health and Human Services/Education, Transportation/HUD, and Homeland Security. The Senate stripped the latter out as a separate bill after a deal was reached between the president and a majority of senators. The sticking point was a demand for changes in Homeland Security.

One additional stumbling block that ultimately led to the 2025 shutdown was the failure to extend the enhanced premium tax credits from the Affordable Care Act that helped make health insurance purchased from the marketplace more financially manageable. The credits expired Dec. 31, 2025, premiums have risen significantly since then, so the House addressed this by voting for a three-year extension. The bill currently awaits Senate action.

This current partial shutdown marks the 15th such occurrence since 1981, including five in the past decade — three during President Trump's two administrations. A shutdown is costly. The nonpartisan Congressional Budget Office estimates that between $7 billion and $14 billion will be permanently lost as a result of the 2025 shutdown.¹ Long shutdowns also hurt private-sector investment because, among other impacts, access to federal loans is disrupted.

Businesses and their employees should understand more about what a government shutdown is, how it might impact them, and then plan accordingly.

What Is a Government Shutdown?

A government shutdown means the government can’t spend money that requires annual appropriations, which affects its ability to pay its employees and keep facilities and buildings open where those employees work. Some employees are considered essential such as air traffic controllers and would have to work without pay during the shutdown. The 2025 shutdown furloughed nearly three-quarters of a million federal employees.

Federal employees are entitled to backpay for as long as appropriations are lapsed under the Government Employee Fair Treatment Act of 2019. It should be noted that employees of federal contractors are not guaranteed backpay under the 2019 law, but a company can decide if they want to provide backpay to these employees.

What Agencies and Services Would Be Affected by a Shutdown?

Here are some closures or partial closures that could impact your business based on previous shutdowns:

• Small Business Administration (SBA): Most of the SBA’s loan approval and processing (e.g., microloans, working capital loans, etc.) would be unavailable during a shutdown.
• Internal Revenue Service (IRS): All tax payments and filed returns will continue to be accepted as the IRS hits the peak of tax filing season, but refunds might arrive after a shutdown ends. The exception to that is e-filed, error-free returns with direct deposit refunds.
  • Expect delays in correspondence from the IRS.
  • All IRS toll-free hotlines will be closed, impacting the ability to get a client EIN Verification via this method.
• E-Verify: The federal internet-based employment verification system will be unavailable for employers to complete the process, but businesses are still required to complete the Form I-9 for new hires. If your business is in a state that mandates the use of E-Verify, you should check with your state’s website for information, including on alternative methods for employee verification.
  • Delays should be expected with onboarding new employees.

On-site audits and food/environmental inspections might be put on hold by agencies such as OSHA, the Department of Labor, the National Labor Relations Board, and others.

Medicare and Medicaid are federal programs that are not subject to annual appropriations, but a shutdown could cause a disruption for participants. For example, there might be a delay in getting Medicare replacement cards. Access to call centers and federal healthcare marketplace resources could be lost, as well.

How Could Businesses Be Impacted by a Shutdown?

There are tangential impacts to consider such as the closing of national parks and national museums (e.g., Adirondack and Yellowstone, the Smithsonian) during a shutdown that could affect businesses that rely on the patronage of federal employees or the tourism industry that helps support the hospitality industry.

States might have to suspend their unemployment programs and possibly find alternative sources of funding because federal unemployment funding to states will cease during a shutdown.

Although most shutdowns in U.S. history have not influenced the stock market because their durations were brief, a shutdown of significant length could shift the stock market. This would impact employee retirement plans (401k), as well as delay federal reports on job growth, housing starts, and other indicators that investors rely on to make decisions..

What Won’t Be Impacted by a Government Shutdown?

Based on previous shutdowns, the list is small of federal agencies and processes that continue to function through a shutdown.

• Social Security checks will go out to recipients. However,
  • Social Security Administration will not issue Social Security cards.
  • The Employee Services toll-free hotline will not be available.
• Medicare open enrollment should not be impacted.
• Medicaid enrollment is handled through individual states.
• The U.S. Postal Service may continue to deliver the mail.
• Members of Congress still get paid.

What’s Next?

Accounting professionals and financial advisors should have conversations with their impacted clients to gain a better understanding of each client’s financial situation and be prepared to offer any resources that might help.

Paychex monitors the developments in Congress and provides updates accordingly. We understand the challenges facing employers and offer educational resources and a variety of funding options to consider that might fit your business needs.

¹ Analysis of the Effects of the Government Shutdown on the Economy, Congressional Budget Office, Oct. 29, 2025