IRS Staff Cuts by 26% May Delay 2026 Tax Filing Season

The budget bill championed by President Donald Trump could complicate the 2026 tax filing season. The Internal Revenue Service (IRS) has lost a quarter of its employees, which could lead to significant delays and inefficiencies in processing tax returns. This reduction in staffing is part of a broader effort to cut government spending, but it raises concerns about the IRS's ability to handle the increased workload during the tax season. The watchdog warns that taxpayers may face longer wait times, reduced customer service, and potential errors in their tax filings. The situation is exacerbated by the fact that the IRS is already understaffed and underfunded, making it difficult to keep up with the demands of the tax season. The cuts could also impact the IRS's ability to enforce tax laws and collect revenue, which could have broader implications for the federal budget. The watchdog's warning highlights the need for adequate funding and staffing to ensure that the IRS can effectively carry out its mission.

The IRS workforce has fallen from 102,113 workers to 75,702 over the past year. Most of the employees took the “fork in the road” resignation offer from DOGE rather than waiting to get laid off. The biggest cuts were in taxpayer services, the small business/self-employed office and information technology. The report noted that the Republican administration’s proposed budget includes a 20% reduction in IRS funding next year. That’s a 37% reduction when taking into account the supplemental funding in the Biden-era Inflation Reduction Act that Republicans previously stripped away. “A reduction of that magnitude is likely to impact taxpayers and potentially the revenue collected,” wrote Erin M. Collins, who leads the organization assigned to protect taxpayers’ rights.

Collins said the 2025 filing season was “one of the most successful filing seasons in recent memory,” though she warned that the 2026 season could be rocky. “With the IRS workforce reduced by 26% and significant tax law changes on the horizon, there are risks to next year’s filing season,” Collins wrote. “It is critical that the IRS begin to take steps now to prepare.” She said that, halfway through the year, there were concerns that the IRS had not yet undertaken key preparation steps, including hiring and training seasonal and permanent employees.

The report warned about the possibility of understaffing to manage new provisions from Trump’s legislative package if it’s enacted. “Several provisions will retroactively affect the 2025 tax year, thus impacting millions of taxpayers and requiring the IRS to quickly update tax year 2025 tax forms and programming for the 2026 filing season,” the report said. Specifically, the House bill retroactively prohibits the IRS from allowing or making payment of Employee Retention Credit claims filed after Jan. 31, 2024. The report also said the IRS historically receives more calls in years following significant changes in tax law, so it may need additional employees and improved digital tools to maintain its level of service.

The IRS is dealing with delays in resolving self-reported identity theft victim assistance cases — taking up to 20 months to resolve. As of the end of the 2025 filing season, the IRS was handling about 387,000 of these cases. That is a slight improvement from the more than 22 months it took to resolve identity theft cases, as noted in last year’s report, which outlined roughly 500,000 unresolved cases in its inventory. “The cycle time remains unacceptably long,” Collins said. “I continue to urge the agency to focus on dramatically shortening the time it takes” to resolved identity theft cases, “so it does not force victims, particularly those dependent on their tax refunds, to wait nearly two years to receive their money.”