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IRS Warning Issued for 2026 Taxes
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Taxpayers could face significant hurdles during the 2026 tax filing season after the Internal Revenue Service (IRS) reduced its workforce by more than one-quarter in the past year, according to a new report delivered to Congress.
National Taxpayer Advocate Erin Collins issued the warning on Wednesday, citing figures that show that the IRS employee headcount dropped by more than 25,000, marking the first official estimate of job losses tied to staffing initiatives under President Donald Trump's second administration.
The House's "One Big, Beautiful Bill," expected before July 4, could create new complexities for the IRS, the report added. Key provisions retroactively apply to the 2025 tax year, such as disallowing Employee Retention Credit claims after January 31, 2024. The changes would require fast updates to tax forms and systems, increasing pressure on the agency's reduced staff.
Erin Collins, national taxpayer advocate, speaks during a Financial Services and General Government Subcommittee hearing on "Internal Revenue Service: Narrowing the Tax Gap and Improving Taxpayer Services," on May 19, 2021, on Capitol Hill in...
Erin Collins, national taxpayer advocate, speaks during a Financial Services and General Government Subcommittee hearing on "Internal Revenue Service: Narrowing the Tax Gap and Improving Taxpayer Services," on May 19, 2021, on Capitol Hill in Washington. MoreWhy It Matters
The reduction of 26 percent of the IRS workforce comes as the agency prepares for new, complex tax law changes anticipated in congressional budget negotiations. Substantial staff losses and the prospect of a 20 percent reduction in the IRS budget, plus retroactive legislative changes, raise concerns about the agency's ability to process returns efficiently and deliver refunds, potentially affecting tens of millions of U.S. households and the federal government's ability to collect revenue.
What To Know
The IRS headcount dropped from 102,113 to 75,702 employees as of June. More than 17,500 employees accepted buyouts under the "deferred resignation program."
The Trump administration's budget proposal features an additional 20 percent funding reduction for the IRS. Accounting for stripped Inflation Reduction Act supplemental funds, that represents a 37 percent budget cut compared to the previous year, the Associated Press reported.
Collins wrote that "a reduction of that magnitude is likely to impact taxpayers and potentially the revenue collected."
More than 80 million Americans will get tax rebates worth $2,942 on average following the 2025 filing season, the Internal Revenue Service (IRS) has said. Individual Returns Received: 140,633,000
Individual Returns Processed:138,057,000
Refunds Issued: 86,021,000
Average Refund Amount: $2,942
Refunds Issued by Direct Deposit: 81,032,000
Although Collins described the 2025 filing season as "one of the most successful filing seasons in recent memory," she warned that the IRS risks being unprepared for 2026 as a result of its reduced workforce and impending tax law changes. Collins said.
"With the IRS workforce reduced by 26 percent and significant tax law changes on the horizon, there are risks to next year's filing season. It is critical that the IRS begin to take steps now to prepare," she said.
Collins warned that without improved technology, IRS staffing cuts could jeopardize the success of next year's filing season
She noted that important steps—such as hiring and training thousands of new seasonal and permanent staff—had not yet begun as of mid-2025.
Where IRS Staffing Cuts Hit Hardest
The cuts, which also resulted from a "deferred resignation program" linked to Elon Musk's Department of Government Efficiency, have particularly impacted taxpayer services, small business/self-employed divisions, and information technology teams, the tax watchdog's breakdown said.
The IRS continued to struggle with an identity-theft backlog, with 387,000 unresolved cases as of June. On average, it took nearly 20 months to resolve a single case, marginally improving on previous performance. Collins called this "unacceptably long," warning that it disproportionately affects victims who rely on tax refunds for everyday expenses.
What Happens Next
The IRS must quickly hire and train thousands of employees and adapt its IT systems to manage new tax law requirements before 2026. The Treasury Department has requested $852 million to fund the efforts.
Congressional actions on tax legislation and IRS budget proposals—expected before July 4—will determine the scale of changes and challenges for the next tax season.
This article used reporting by The Associated Press.
