New law, IRS workforce cuts raise red flags for tax season, reports say

With staffing levels dropping, budgets shrinking, and a massive new tax law to implement, the IRS faces a 2026 filing season that two federal oversight bodies say could strain the agency’s ability to serve taxpayers.

This week, the Treasury Inspector General for Tax Administration (TIGTA) and the national taxpayer advocate (NTA) warned in separate reports that the IRS may struggle to maintain service levels between now and April 15, possibly causing delays in tax refunds and in getting answers on the phone.

“Among the reasons the 2025 filing season went well was that the IRS had its largest workforce in many years and faced no major tax law changes that required implementation during the filing season,” NTA Erin Collins wrote in the preface to her annual report to Congress, which was published Wednesday. “Entering 2026, the landscape is markedly different.”

The NTA report noted that the IRS “is simultaneously confronting a reduction of 27% of its workforce, leadership turnover, and the implementation of extensive and complex tax law changes mandated by [H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act], many of which apply retroactively and require significant IRS programming, guidance, changes to tax forms and instructions, and taxpayer education.”

TIGTA wrote in a memo to Treasury Secretary Scott Bessent, also serving as acting IRS commissioner, that staffing reductions returned the number of IRS employees to levels last seen in October 2021.

“At the same time, key inventories waiting to be processed (such as amended tax returns and taxpayer correspondence) have significantly increased,” the memo said. “Efforts to hire filing season employees were delayed due to the government shutdown and changes to the hiring process within the Department of the Treasury. Lastly, new efforts to modernize tax administration are delayed, and their expected efficiencies may not occur during the upcoming filing season.”

The NTA report noted that in January 2025 the IRS employed over 102,000 people; by December, that number was 74,000, but the drop was more substantial than mere numbers. “Many departing employees were experienced workers whose institutional knowledge and technical expertise cannot easily be replaced,” Collins wrote.

Collins also noted turnover in leadership that she said has compounded the challenges that IRS employees face. As of Nov. 12, the IRS leadership chart listed 28 positions classified as “top officials,” the majority of which were either vacant or filled by acting officials, Collins wrote. “The loss of experienced managers has been mirrored throughout the agency and inevitably affects planning, coordination, and execution during filing season,” the NTA report said.

TIGTA cited a growing backlog of taxpayer filings and a failure to hire and train new staff to handle tax season. For example, the Accounts Management function received permission in August 2025 to hire about 3,500 employees for this tax season, which was about four months later than the 2025 tax season, TIGTA’s memo said.

Accounts Management, which generally handles taxpayer contacts through telephone and mail, also is responsible for processing adjustments to tax accounts and certain amended tax returns. Management onboarded 2,300 (66%) employees from September through December. Typically, onboarding would have been completed no later than Aug. 31, but hiring was not approved until August.

Because of the delay, training was modified to bring as many new employees as possible on board, TIGTA said.

“For example, new hires are typically trained to answer individual telephone questions and individual amended tax return questions,” TIGTA wrote. “Now, they are only being trained to screen calls, i.e., route them to the right assistor, and answer basic questions on refunds. Accounts Management leadership also plans to increase overtime usage throughout the fiscal year to mitigate any negative impact of their hiring shortfall.”

TIGTA provided several examples of an increasing backlog, including the number of paper tax returns waiting for handling. That number, which was 182,000 in December 2019, had dropped to 52,293 in December 2024. A year later, in December 2025 after staffing cuts, the number was 294,052, TIGTA said.

“Inventory that is not worked during the current processing year will be carried into the 2026 filing season and may affect the IRS’s ability to timely process tax returns during the filing season, especially with reduced staff,” TIGTA’s memo said. “This could result in delays in taxpayers receiving refunds and could result in the IRS paying interest.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.