Taxpayers may face significant challenges during the 2026 tax return season due to the Internal Revenue Service (IRS) reducing its workforce by over 25,000 employees in the last year, as reported to Congress. Erin Collins, the national taxpayer advocate, issued this warning, highlighting how IRS personnel numbers have dropped dramatically.
This reduction comes at a time when Congress is gearing up for a major tax overhaul, which could complicate matters for the IRS. A new bill that’s anticipated around July 4th might introduce complexities, especially since some provisions will be retroactive to the 2025 tax year. These provisions include allowing employees to claim certain credits starting January 31, 2024, necessitating quick updates to tax forms and systems, all while the IRS is dealing with a reduced workforce.
Why is it important?
The IRS’s workforce has decreased by 26%, coinciding with significant budget cuts and expected complicated tax law changes on the horizon. With personnel cuts and a 20% budget reduction, there are concerns about the IRS’s ability to manage tax processes efficiently, which could have far-reaching effects on millions of American households and the federal government’s revenue.
What do you know
IRS staffing levels have fallen from 102,113 to 75,702 employees as of June, with over 17,500 employees participating in a “deferred resignation program.” Additionally, the previous administration proposed a budget cut of 20% for the IRS, which, when coupled with other funding changes, has led to a significant budget decrease compared to prior years.
Collins noted that this reduction is likely to affect taxpayer services and potentially reduces the revenues collected. For instance, in the 2025 application season, the IRS is projected to collect an average of $2,942 in taxes per person. A significant number of personal revenue and tax refunds processed highlights the volume of work that the IRS handles.
While Collins has referred to the 2025 filing season as one of the most successful in recent years, she expresses concern that the IRS is not adequately prepared for 2026 due to its reduced workforce and looming tax law changes. She emphasized that immediate action is required for hiring and training new staff to alleviate these risks.
Where IRS personnel delivery is the most intense
The reduction in IRS staffing due to the deferred resignation program has particularly impacted taxpayer services and small business sectors. The IRS is also grappling with a backlog of identity theft cases, with about 387,000 unresolved instances as of June. On average, resolving these cases has taken nearly 20 months, a situation Collins described as “unacceptably long,” especially affecting those who depend on tax refunds for daily living expenses.
What will happen next
The IRS faces the urgent need to hire and train thousands of new employees by 2026 while also adapting their IT systems to meet new tax law requirements. The Treasury has requested a substantial budget to support these efforts. Congressional actions regarding tax laws and IRS budgets are expected by July 4th, which will significantly influence the upcoming tax season’s landscape.
