With tax deadlines on the country, millions of people once again enjoyed a smooth tax season and quick refunds. However, warning signs have been built that taxpayers may encounter delays or headaches a year from now.
Despite the upheavals in Washington, the 2025 filing season has already been a success for my former employer, the Internal Revenue Service. For that credit, the Trump administration’s finance team has, for now, wisely left the IRS core tax season management.
However, there must be a source of concern as the IRS is facing major cuts.
The disastrous submission season known 40 years ago as “Tax Season from Hell” brings similarities with ominous warning signs that can foresee what taxpayers can face in 2026.
“The biggest thing the IRS can’t do is make repeated mistakes in 1985 and ruin the taxpayer and the country’s filing season,” said former IRS commissioner Larry Gibbs, who chose to clean up the agency in the aftermath of that disaster.
Since then, taxpayers have been able to rely on the IRS business throughout the year, offering tax seasons and reimbursing their money each year. These are the biggest checks that many taxpayers watch all year round, with an average of $3,116.
A smooth tax season, like what’s happening this year, doesn’t happen automatically. However, if you have a disability in the IRS, it may look like 1985.
That year, the IRS was introducing new technologies to digitize tax information and modernize processing tax returns. But well-intentioned technology plans were in a hurry. The complexities of the IRS system have been elucidated, creating the domino effect of cascade problems.
“The IRS changed the hardware and software at the service center. That didn’t work,” Gibbs was recently docked at the Marina in Sarasota on a sunny Florida afternoon overlooking the boat.
This means that 10 processing centers across the country were unable to quickly process their paper tax returns. Inadequate planning and budgetary challenges have led to snowballing issues, including new computer systems with insufficient capacity and failed software. Raw paper tax returns have been stacked. In Chaos, tens of thousands of returns have gone missing.
“Tax returns are starting to stack up,” Gibbs explained. “Because of all the stacked returns, we literally couldn’t walk through the service centres, and our employees were pushing them up to the ceiling.
The system is just “broken,” Gibbs explained.
This meant that tens of millions of tax returns and refunds were not processed until deep into the fall. Instead of getting a refund in a few weeks, taxpayers have found themselves waiting for more than six months for the biggest checks of the year. Some taxpayers were required to file a second replica tax return.
“The IRS issues have affected everything across the country,” Gibbs said. “Taxpayers didn’t make any money for months. It had an impact on the national economy. It showed up in the economic reading. It was an incredible mess. People were furious.”
The news headlines were non-stop. However, what Gibbs achieved after his arrival became an example of the textbook for future IRS commissioners. With the help of his leadership team, Gibbs straightened out the 1985 failure and brought the IRS back on track in 1986. He also implemented Reagan’s Signature Tax Reform Act.
Gibbs is among many in the tax community who are worried about history repeating itself.
Today, the IRS faces waves of budget cuts and staff losses. Though the tasks of tax season are barely tackled, employees are essential to face a future that is essential for tax time, with tens of thousands of jobs looming over the coming weeks.
Like 1985, the issue of technology is looming in 2026. The technology team has already lost key staff and is considering moving out more. IRS Insiders note that IRS-embedded Government Efficiency Office staff have recently begun to tinker with tax season and complex programs that provide reimbursement. People inside and outside the IRS fear unfamiliar people who interfere with the complex mechanisms of agency systems and tax law.
“The best thing I’m telling the new commissioner is that no matter what you do, you can’t ruin the filing season,” Gibbs explained.
As the 2026 tax season plan begins in weeks, key questions arise as to whether agencies can deliver a smooth tax season next year with discussions about low staff, unemployment distractions and overhauls at key agencies.
The next tax season will become even more important as 2026 will be the election year that determines who controls Congress. It also happens when the IRS is implementing a new tax law currently under consideration. Reducing IRS resources creates unique political challenges. As shown in 1985, failures in the IRS have far-reaching effects, both economically and politically.
Our tax system is built on the concept of “paying as you go” through either pay withholding or estimated tax payments. Fast refunds are the basis of that concept, and taxpayers resort to prompt refunds. Delays in refunds could erode the belief in tax systems and the concept of “voluntary compliance” by tax law.
Gibbs and others are worried that if cuts are made by the IRS, it could create ripple effects, such as those who don’t pay taxes and simply don’t file tax returns. Reducing refund incentives and dramatic reductions in IRS tax enforcement raise major challenges in the goal of reducing the country’s economic performance and deficit.
The Trump administration must carefully consider these implications for 2026 before cutting core IRS operations. At the end of the day, IRS cuts pose a risk to elected officials as well as taxpayer bank accounts and the source of income from the country.
Gibbs explained: “If you’re a member of Congress or you’re a taxpayer, the last thing you want is for the IRS to have a bad filing season.”
Terry Lemons oversaw communications and congressional issues for 26 years in the IRS, working with six different IRS commissioners. Previously he was Washington Director of the Arkansas Democratic Gazette.
