Payroll and human resource solutions provider, Paychex Inc. (PAYX) recently discussed the impact of a possible shutdown of the federal government on small businesses nationwide.
Paychex said that in a government shutdown, negotiations on tax abatement and many other activities, including audits could possibly be deferred. Though the Internal Revenue Service (IRS) will continue to accept tax returns and other tax payments during a shutdown, applications from small businesses for an Employer Identification Number (:EIN) may not be accepted for a while.
Additionally, up to 1 million U.S. federal workers could face furloughs, implying that they would not receive any paychecks. Additionally, passport and visa applications could be put on hold.
Apart from the potential market blows, companies expecting to raise funds from an initial public offering could face delays. Approval of small business loans and other lending functions could also stop during this event. Moreover, payments from federal government as well as capital-raising are likely to come to a halt.
Despite the shutdown, several services such as National Weather Service, Social Security payments, air traffic control systems, Medicare, food inspections and veterans’ benefits will remain unaffected. Moreover, prison guards, FBI agents, the Border Patrol and Air traffic controllers will stay on duty.
There have been two similar shutdowns in the past 20 years, due to a partisan budget. The first government shutdown was for five days in 1995 and the second one was again in December for 21 days. According to government estimates, those shutdowns cost taxpayers approximately $1.4 billion.
Paychex, Inc. is a provider of payroll and human resource (HR) outsourcing services for small and medium-sized businesses (SMBs). Its offerings include comprehensive payroll services, including payroll processing, payroll tax administration and employee pay services.
Currently, Paychex has a Zacks Rank #3 (Hold). Investors may also consider stocks such as Portfolio Recovery Associates Inc. (PRAA) and Micron Technology Inc. (MU) both carrying Zacks Rank #1 (Strong Buy) and LinkedIn Corp. (LNKD), which has a Zacks Rank #2 (Buy).