January 29, 2026, 4:32 PM ET
- Erin M. Collins, the National Taxpayer Advocate, highlighted possible challenges for the upcoming 2026 tax season in her annual report for 2025.
- This season, millions of taxpayers will notice a significant shift as the IRS moves away from issuing paper checks.
As we approach the 2026 tax season, there’s an expectation of various potential issues. However, most taxpayers should see their federal income tax returns handled promptly, and refunds processed without delays, according to Collins’ recent report to Congress.
Still, it seems there won’t be a completely smooth ride ahead.
In her report released on January 28, Collins pointed out some of the upcoming hurdles the IRS will face. These include workforce reductions of 27%, shifts in leadership, and the challenge of implementing complex tax law changes retroactively to 2025 following the signing of the One Big Beautiful Bill on July 4.
Collins mentioned that the One Big Beautiful Buildings Act is generally seen as beneficial to taxpayers, expanding the eligibility for essential tax credits and incentives.
However, she cautioned that the new deductions and benefits come with complicated rules around eligibility, income levels, and phase-outs which could confuse many taxpayers and complicate the IRS’s management during the filing process.
With big changes for 2025—like crucial IRS programs, updates to tax forms, and necessary taxpayer education—the upcoming season is likely to bring about challenges, especially for those needing assistance from the IRS, who might face even greater difficulties.
“The success of this filing season hinges on how well the IRS supports millions of taxpayers in need,” Collins reported. But let’s be honest, expecting a completely hassle-free tax season seems a bit optimistic.
Where is my (paper) refund?
For many, this tax season will bring notable changes regarding refunds, particularly as the IRS phases out paper checks.
During the last filing season, about 94% of individual taxpayers provided direct deposit information on their Form 1040. Yet, a number of individuals still receive paper checks, which can introduce its own set of complications.
Paper refunds can easily get lost, stolen, or tampered with, leading to frustrating and lengthy resolution processes for affected taxpayers. In fact, Treasury checks are reported to be 16 times more likely to face such issues compared to electronic payments. Collins supports going digital but emphasizes that it needs to be done carefully and with clear communication.
The IRS has plans to issue more reminders for taxpayers to provide their banking details for direct deposits. Some individuals may need to set up new accounts or consider using reloadable debit cards or digital wallets to ensure their refunds are deposited directly.
Collins indicated that failure to provide direct deposit information could result in significant delays when it comes to refunds. The IRS is set to send letters to individuals asking for banking info if it’s missing, or if a direct deposit fails, taxpayers will also get notified.
If direct deposit details aren’t provided, the IRS might hold refunds for up to six weeks, after which they would request bank information or determine exceptions before issuing a paper check.
This transition could disproportionately affect unbanked or underbanked individuals, the elderly, and other vulnerable taxpayers who rely on paper checks for necessary funds.
Recent policy changes are helping student loan borrowers
Another potential concern regarding student loan defaults seems to have been sidestepped for now.
The 2026 season was anticipated to see the re-emergence of tax refunds being offset for federal student loan defaults, which understandably can create financial strain on those depending on cash refunds.
Fortunately, on January 16, the U.S. Department of Education announced a pause on involuntary collections for defaulted federal student loans, including tax refund offsets, although the length of this delay isn’t clear, adding to the uncertainty.
Submitting paper returns may cause problems
Continuing with paper returns instead of electronic filing may amplify issues in 2026.
Even though most taxpayers opt for electronic submission, around 11 million (or 6%) still filed on paper last year. This year, the era of outsourcing processing for paper returns could bring about new risks.
The IRS initiated a “zero paper initiative” aimed at digitizing operations, but there are concerns about relying too heavily on private contractors for scanning returns and reducing the workforce that processes paper filings before properly validating the technology.
Moreover, there are operational risks tied to outsourcing, seen recently when an IRS contractor mishandled confidential taxpayer information.
Collins highlighted these issues and called for stricter penalties if contractor protections fail.
Some refund delays and phone service issues raise concerns
The advocate’s report, as mandated, outlines key issues taxpayers may face:
Delay in refund
Many taxpayers wait over 21 months for the IRS to resolve identity theft-related cases and process refunds. Collins suggested aiming to trim this timeframe to just three months.
Moreover, around 1.6 million amended corporate returns were processed in the last fiscal year, often taking over 13 months, while individual amended returns averaged more than five months.
Refund delays can significantly harm taxpayers, particularly those experiencing cash flow issues and low-income individuals needing refunds for basic expenses.
The report highlighted the IRS’s unclear notice system regarding disallowed refund claims, lacking essential deadlines and information.
It recommends further automation in processing amended returns and clearer communication regarding refund prohibitions. Last year alone, over 165 million individual tax returns were filed, with 63% receiving refunds averaging $3,167.
While most refunds were processed timely, about 3.6 million taxpayers faced longer delays, averaging seven weeks for electronic filers and 14 weeks for paper submissions.
Telephone service
Each year, the IRS handles over 100 million phone calls, but Collins noted a lack of effective measures to evaluate the quality of the service. Many call metrics don’t capture whether taxpayers’ needs are effectively met.
Concerns were raised about millions of calls being directed to automated systems, which many taxpayers found unsatisfactory. Collins referenced a survey where only about half found the automated process helpful.
With a 22% reduction in customer service representatives last year, even as some positions were filled later on, the IRS currently operates with fewer experienced staff members than before.
