Copyright forbes
IRS word on a wooden cubes on chart background As the Federal government enters its second month of being shut down, we can begin to see the consequences unfolding. Whether it be SNAP benefits going away, the military and air traffic controllers facing paycheck uncertainty, or rising healthcare costs, the financial situation in the U.S. appears to be in flux as the shutdown continues, as discussed by Forbes. While some of these more direct impacts are salient, there are unintended consequences to the shutdown that are causing adverse impacts that may not be quite as clear. One such impact is the shutdown of IRS Taxpayer Assistance Centers. Recently published research suggests that these centers provide significant benefits to businesses, especially for entrepreneurs, by reducing taxpayer compliance costs. In this article, I define what an IRS Taxpayer Assistance Center is and discuss how recent academic accounting research sheds light on how the shutdown might be impacting centers’ benefits to taxpayers. IRS Taxpayer Assistance Centers IRS Taxpayer Assistance Centers are offices where taxpayers can get help on their taxes. According to the IRS, actual IRS employees are the ones who help with taxpayers within these centers, and the services offered range from assisting with tax notices or letters received from the IRS, resolving account issues, making payments to the taxing authority, and getting help with tax law questions. These offices are typically open Monday through Friday during normal business hours. Even though taxpayers typically need an appointment to meet with the IRS agents, they do take walk-ins based on availability. In total, there are 363 offices across all fifty states, according to the IRS. However, these centers are not currently open. As it states on their website, “The centers are closed until further notice, due to the U.S. government shutdown on Oct. 8, 2025. We’ll provide regular service when government agencies reopen”. The Impacts of IRS Taxpayer Assistance Centers Recent research in the Journal of Accounting And Economics explores the positive impacts that the IRS Taxpayer Assistance Centers have on businesses, especially smaller businesses and entrepreneurs. In a study titled “Does taxpayer assistance encourage entrepreneurship?” researchers examined 51,636 zip-code-year observations across 8,606 zip codes and found that taxpayer assistance with filing and compliance acts as a catalyst for entrepreneurship. This article is co-authored by Daphne Armstrong of the University of Michigan and Stephen Glaeser of the University of North Carolina at Chapel Hill. Their study aims to explore how taxpayer assistance affects local entrepreneurial entry. MORE FOR YOU In discussing the key motivation for examining their research question, Armstrong states, “As the daughter of a small business owner, I realized that one of my own parents struggled with the financial complexity of owning a business, and that having in-person help with any financial task significantly eased the burden for them. Additionally, the entrepreneurs in Stephen’s life mentioned struggling with the complexity of the tax system, and once they found out that he was an accounting professor, they asked him for assistance with their taxes.” The study finds that Taxpayer Assistance Centers are significantly associated with local entrepreneurial entry. Armstrong specifically notes, “Openings associate with increases in entrepreneurship, and closings associate with decreases.” The study specifically estimates that Taxpayer Assistance Centers are associated with a 4 to 13% increase in entrepreneurship, which translates to the creation of about 10 businesses. Furthermore, Armstrong states, “the effect of a Taxpayer Assistance Center on local entrepreneurship declines rapidly with distance. Zip codes neighboring a Taxpayer Assistance Center only experience about one-third of the benefit in entrepreneurship that the focal zip codes do.” Based on these findings, the authors suggest that there are several implications for policymakers. “First, the results suggest that improving the service operations of the IRS may have spillovers into business creation, which may not currently be considered in the costs and benefits of IRS operations. Second, they suggest that simplifying tax filing and compliance by reducing tax complexity may encourage entrepreneurship. Third, the evidence that Taxpayer Assistance Centers mainly affect local entrepreneurship suggests that improving awareness of Taxpayer Assistance Centers in neighboring geographic areas may be a low-budget alternative to expanding Taxpayer Assistance Centers operations. These findings have clear implications for the current state of the U.S., where the government shutdown has left the IRS Taxpayer Assistance Centers shuttered for business. As this shutdown rages onward, an unintended consequence might be a decline in these entrepreneurial efforts. While a Forbes contributor piece estimates that the shutdown could impact the economy by as much as $14 billion, this forthcoming academic research article in the Journal of Accounting and Economics suggests the impacts might be bigger and not fully felt for many years to come. Editorial StandardsReprints & Permissions
