IRS Beat Expectations in Tax Season Despite Staff Cuts, Watchdog Says
WASHINGTON — The IRS performed “better than expected” during the 2026 tax season despite a dramatic 27% reduction in its workforce, according to a mid-year report released Wednesday by National Taxpayer Advocate Erin M. Collins. However, the watchdog warned that taxpayers who needed human assistance were largely left behind, with phone service failures reaching crisis levels.
“The vast majority of taxpayers filed their returns successfully and received their refunds without significant delay,” Collins said in her report. But she added: “Taxpayers who required assistance from the IRS often struggled to get it.”
A Workforce Cut in Half
The IRS began 2025 with approximately 102,000 employees and finished the year with about 74,000 — a reduction of roughly 28,000 workers. The cuts were driven by the Department of Government Efficiency (DOGE), headed by Elon Musk, which targeted the agency as part of a broader effort to shrink the federal bureaucracy. Voluntary separation incentives, including a deferred resignation program and early retirement offers, accounted for the majority of the roughly 26,100 separations.
The workforce reduction was compounded by a federal hiring freeze and a 43-day government shutdown in the fall of 2025, which delayed hiring and compressed training timelines. According to the Government Accountability Office, the IRS concluded that return processing, customer service and other functions would enter the filing season “undertrained or understaffed,” which could lead to processing errors and ultimately harm taxpayers.
Phone Service: A Major Pain Point
While technology improvements and automation helped prevent a total meltdown during tax season, the agency’s phone service fell far short of acceptable levels. According to Collins’ report:
- 59% of calls on major accounts management lines were answered
- 34% of calls on compliance lines got through
- 19% of calls on the identity theft victim line were answered
The number of customer service representatives shrank by 22% in 2025. Although the IRS backfilled some positions late in the year, the new hires have significantly less experience than the employees who departed.
Identity Theft Crisis Deepens
More than 500,000 identity theft victims face average case resolution times of roughly 20 months — approximately 600 days. Collins described this as a “long-standing issue” at the agency that has worsened amid staffing reductions. Identity theft victims face the longest wait times of any IRS service category, leaving them vulnerable to financial harm for nearly two years.
Paper Returns Slow Down
The loss of more tenured employees has had measurable operational consequences. The average number of days to process paper returns increased from 27 to 36 days after the 2025 tax season compared with the previous year. Use of overtime to process returns also jumped by 38% between 2024 and 2025, primarily due to the agency’s inability to meet hiring targets.
Leadership’s Assessment
Frank Bisignano, head of the Social Security Administration and de facto leader of the IRS, testified before Congress in March 2026 that he “feels good” about the IRS’ current staffing level, while acknowledging that there has been no formal assessment of workforce effectiveness following the reductions.
What’s Next
The IRS lifted its hiring freeze on June 17, 2026, following pressure from Sen. Raphael Warnock (D-GA), raising questions about whether the agency can rebuild its workforce in time for the 2027 tax season. With affordability emerging as a key issue for both parties in the 2026 midterm elections, IRS performance and tax refund timeliness could become political flashpoints.
Collins’ report underscores a fundamental question facing the agency: Can technology truly replace human customer service for a tax code as complex as America’s? For the millions of taxpayers who need help, the answer so far appears to be no.