IRS Faces Significant 2026 Tax Season Challenges Due to Staff Cuts and New Laws
The National Taxpayer Advocate has issued a stark warning that the 2026 tax filing season is likely to encounter substantial difficulties for taxpayers, primarily driven by deep workforce reductions at the Internal Revenue Service and the implementation of complex new tax legislation.
Workforce Exodus and Legislative Complexity
In her annual report to Congress, National Taxpayer Advocate Erin M. Collins highlighted that the IRS is confronting a perfect storm of challenges. The agency has seen a dramatic 27% reduction in its workforce since the beginning of the Trump administration, coupled with significant leadership turnover. Simultaneously, it must implement extensive and intricate tax law changes mandated by the Republican tax and spending measure signed into law last summer.
Collins noted that while the IRS managed to process returns in 2025 without major disruptions, "entering 2026, the landscape is markedly different." The report emphasises that the success of the upcoming filing season will largely depend on how effectively the IRS can assist the millions of taxpayers who inevitably encounter problems during the filing process.
Confidence from Leadership Amidst Concerns
Despite these warnings, agency leaders have expressed optimism about the upcoming season. Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano have both publicly stated they expect a smooth filing period. Bisignano recently announced new priorities and a reorganisation of IRS executive leadership in a communication to the agency's 74,000 employees, expressing confidence that "with this new team in place, the IRS is well-prepared to deliver a successful tax filing season for the American public."
The Trump administration has also promised American taxpayers "substantial tax refunds" as part of their strategy to address ongoing affordability concerns, adding another layer of expectation to the upcoming season.
Inspector General's Additional Warnings
Other watchdog agencies have echoed these concerns. Diana M. Tengesdal, Deputy Inspector General for Audit at the Treasury Inspector General for Tax Administration, wrote to IRS leadership at the season's start, pointing to critical issues. She highlighted that IRS staffing has returned to October 2021 levels while the agency faces thousands of unprocessed tax returns and taxpayer correspondence.
The staffing situation is particularly acute. The IRS began 2025 with approximately 102,000 employees but ended the year with only about 74,000 after a series of firings and layoffs initiated by the Department of Government Efficiency. While customer service workers were prevented from accepting buyout offers until after the 2025 filing deadline, many have since departed, creating a significant service gap.
Tengesdal's office cautioned that despite new modernisation efforts, "initiatives to offset staffing losses may not yield expected benefits during the 2026 Filing Season."
Previous Season's Performance and Current Expectations
In 2025, the IRS processed more than 165 million individual income tax returns, with an impressive 94% submitted electronically. The average refund amounted to $3,167, setting a benchmark for taxpayer expectations. However, the combination of reduced staffing capacity and increased legislative complexity creates unprecedented challenges for maintaining this level of service.
As the 2026 tax season commences, taxpayers are advised to file early and utilise electronic submission methods where possible. While most taxpayers should experience normal processing times, those requiring assistance may face longer wait times and reduced support options due to the diminished workforce.
The coming months will test the IRS's ability to navigate these dual challenges while maintaining public confidence in the tax system during a period of significant transition and reduced resources.
