Tax Season Begins with IRS Backlogs and Staff Shortages, Says IG
TL/DR –
The inspector generals’ office at the IRS has concerns about the IRS’s readiness for the 2026 filing season due to increased inventory levels in key return processing programs resulting from efforts to reduce staff and the government shutdown. The agency has reportedly lost 19% of its employees, around 19,000, with further reductions likely, which includes the areas responsible for key functions like processing original and amended tax returns, resolving tax return errors, and stopping tax-related fraud before refunds are issued. The reduced staff and increased inventory levels may delay tax return processing, potentially leading to delayed taxpayer refunds and increased interest payments by the IRS.
IRS Filing Season 2026: Potential Delays and Staffing Challenges
The role of staffing reductions on the IRS’s preparedness for the 2026 tax filing season has been a cause for concern according to a statement from the office of the inspector generals. The statement highlights a rise in pending inventories that could impact the prompt processing of tax returns throughout the filing season, which started this week.
As per the report, the IRS has faced significant workforce reductions, losing around 19,000 employees or 19 percent of its total staff through October, with additional cuts anticipated after that date. The figure represents the lowest staffing level in half a decade. Crucial areas like the processing of new and amended tax returns, resolution of tax errors, tax fraud countermeasures and IRS system updates have all been hit by the staff cuts.
Another factor leading to increased inventories is the government shutdown that took place in autumn, which impacted operating procedures even though the IRS remained fully functional for the first five days. Despite keeping 60 percent of critical staff for the 2026 season’s preparations on paid status with 2022 Inflation Reduction Act advance funding, the shutdown still had adverse effects.
Inventory levels of amended returns have grown from around 492,000 to about 548,000 from the end of 2024 to the end of 2025. Other inventory categories like correspondence, error resolution, paper tax returns, and rejects have also seen a significant increase. Such rising inventories will likely affect the IRS’s ability to process tax returns promptly, possibly causing delays in refund distribution and accruing interest for the agency. As an example, processing delays and other individual interest payments led to a payout of $2.6 billion in interest by the agency in the 2025 processing year.
Adding to the pressure, the report revealed that out of the 2,200 employees the submission processing function was authorized to hire for the 2026 season, by the end of 2025 only two percent had been onboarded. This slow onboarding process poses a significant risk, as training can take up to 60 to 80 days, which might not be completed in time for the filing season.
The report also criticizes the Trump administration’s hiring policies, which caused delays in job postings at the IRS. The new process necessitates approvals for hiring from the IRS’s Chief Executive Officer and the Department of the Treasury before job postings can be made and selections must also be approved by these entities before employment offers are extended.
The accounts management function has onboarded 66 percent of approved hires, but delays have compelled the IRS to cut back on new hire training. This may restrict the new employees’ ability to assist taxpayers as new hires are now only being trained to screen and route calls, as well as answer basic questions on refunds, instead of being able to answer individual telephone and amended tax return questions.
Lastly, the report expresses doubts over whether initiatives designed to compensate for staff losses, like converting paper submissions to digital and increasing automation and AI utilization, will yield the anticipated benefits for the 2026 filing season.
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