Tax filing season is underway, and the agency at the center of it is operating with far fewer people and far more political baggage than it had just two years ago. The Internal Revenue Service has shed more than 20,000 jobs, faces a $10 billion lawsuit from President Donald Trump, and is being asked to implement a sweeping new tax law at the same time. The result is a system that looks less like a routine annual ritual and more like a stress test for how much strain the country’s tax machinery can take before it starts to crack.
Behind the headlines about bigger refunds and new deductions is a more basic question of capacity: can a shrunken IRS process 164 million returns, answer questions, and police fraud with the staff and technology it has left. The evidence so far suggests taxpayers should brace for slower service, longer waits for refunds, and a growing reliance on private tax preparers to navigate rules that are getting more complex just as the public infrastructure to administer them is being hollowed out.
The IRS enters filing season with fewer people and less money
The Internal Revenue Service opened the 2026 filing season from WASHINGTON on Jan. 26, with The Internal Revenue Service inviting taxpayers to file as early as Monday, January 26, 2026, even as it acknowledged ongoing resource constraints. Behind that formal launch is a stark staffing picture. According to the IRS’s own Taxpayer Advocate, the agency began 2025 with 102,000 employees and then cut staff by 27% over the year, a reduction that left it with roughly three quarters of its previous workforce heading into this season. Those cuts translate into fewer people to answer phones, fewer hands to process returns, and fewer specialists to troubleshoot the inevitable problems that surface when new laws hit real life.
The budget side of the ledger looks just as tight. IRS fiscal year 2026 funding has been reduced, with specific allocations for enforcement, taxpayer services, and Technology and operations: $3.16 billion, reflecting a political decision to shrink the agency even as its workload grows. President Donald Trump signed a government funding compromise that locks in substantial reductions in IRS resources, even as that same package expects the agency to implement new tax priorities and manage the filing season. When I put those numbers together, I see an agency being asked to do more with less in a way that feels less like efficiency and more like deliberate constraint.
A workforce stretched thin, reassigned, and demoralized
The human side of those cuts is already visible inside the agency. The IRS has dramatically slashed its workforce, cutting more than 20,000 employees, or more than 20% of total staff, and managers are now tapping people with no relevant experience to assist during filing season. Internal accounts describe an organization where employees are being pulled from back-office roles and told to staff front-line positions, often with minimal training and little choice in the matter. That is not a recipe for consistent, high-quality service, especially when the rules they are administering have just changed.
In one telling example, IRS employees said the agency is looking to detail up to 1,400 IRS non-bargaining unit employees to volunteer for frontline filing season work, with some reporting they felt “voluntold” to accept reassignment. Separate reporting describes how Cracks are emerging as the IRS moves back-office staff into taxpayer-facing jobs, a stopgap that may keep phone lines open but risks more errors and burnout. The IRS division tasked with processing original and amended tax returns has managed to hire just 50 employees in anticipation of the 2026 filing surge, even though that unit is responsible for turning around refunds that millions of households depend on. When a system this complex runs on improvisation, the margin for error shrinks fast.
New laws and inflation tweaks add complexity for everyone
All of this would be challenging enough in a steady policy environment, but the tax code itself is shifting underfoot. The One, Big, Beautiful Bill reshaped brackets, credits, and deductions for 2026, and the IRS has now published detailed inflation adjustments for tax year 2026 that incorporate those changes. Notable amendments under the One, Big, Beautiful Bill include revised marginal rates, expanded child and family benefits, and updated Adoption Credits, each of which requires new forms, new instructions, and new programming in IRS systems. For ordinary filers, the headline is that the Standard Deduction will be $24,150 for many standard filers, a sizable change that alters whether it makes sense to itemize.
Layered on top of that is a new deduction for qualifying overtime pay that took effect for the 2025 tax year, allowing You to deduct up to $12,500 in certain circumstances. That provision is meant to reward extra work, but it also demands careful recordkeeping and nuanced guidance that a smaller IRS may struggle to provide at scale. The agency itself has tried to steer taxpayers toward self-help tools, urging people to Create an IRS Individual Online Account for security and convenience and using its news releases for the current month to highlight digital resources. The strategy is clear: push as much routine work as possible online so limited staff can focus on the hardest cases. The risk is that those without reliable internet access or digital literacy, often lower income and older taxpayers, are left behind.
Refunds: bigger checks, longer waits
For many households, the only part of tax season that really matters is the refund. The IRS expects 164 m people to file individual returns this year, and a large share of them will be owed money back. Early estimates suggest average refunds could be larger, thanks in part to the new law and inflation adjustments, and some analyses argue Americans are set to see higher tax refunds this year. However, that good news comes with a catch. The same reports warn that However, staffing cuts at the IRS could slow the process, because there are simply fewer people dedicated to getting them out.
Processing times are already under pressure. The IRS division that handles original and amended returns has warned that some refunds could take up to 180 days, particularly when returns are flagged for manual review. Watchdogs like the National Taxpayer Advocate Erin M. Collins have cautioned that filing a paper return could trigger trouble, with paper processing introducing operational and confidentiality risks that slow everything down. As of 2026, nearly 11 million Americans still file their tax returns on paper, and The IRS outsources the handling of those returns using private contractors, which adds another layer of coordination and potential delay. When I compare this to pre-2025 norms, when most straightforward refunds arrived within three weeks, the shift looks less like a minor slowdown and more like a structural backlog.
The Trump lawsuit and political crossfire
Into this already fragile environment has landed an unprecedented legal fight. President Donald Trump has filed a $10 billion claim against the IRS, a move that tax experts say could further strain the agency’s focus and resources. The suit arrives just as a tax-industry watchdog is sounding the alarm about Tax Season 2026 strain and the need for modernization at the tax agency, raising the stakes for how the public perceives any missteps. Even if the litigation itself is handled by a relatively small team of government lawyers, it adds political heat to an agency that is supposed to operate as a neutral administrator of the law.
The broader political context is just as important. Recent spending bills that cut IRS funding and omit tax priorities were signed by President Donald Trump, cementing a policy choice to shrink the agency while also championing the One, Big, Beautiful Bill that expanded benefits and complexity. Another analysis of IRS budget cuts, staffing losses, and backlogs notes that the lawsuit lands as a new report from the National Taxpayer Advocate warns about operational risks and the need for better technology. I read this as a feedback loop: political attacks weaken the IRS, weaker performance fuels more criticism, and the cycle continues. The assumption that you can punish the tax collector without affecting taxpayers themselves looks increasingly shaky.
Watchdogs warn of systemic risk, not just “inconvenience”
Independent overseers have been unusually blunt about what all of this adds up to. In a memorandum assessing taxpayer services, tax processing, and modernization efforts, the TIGTA Deputy Inspector General for Audit flagged concerns about staffing, technology, and resource prioritization and realignment as the 2026 season opened. A separate analysis from the Treasury Inspector General, cited in a piece asking What Will The Filing Season Look Like, underscored that the IRS will need far more help this season to meet basic service standards. When auditors and advocates start talking about “operational risk” rather than just “customer service,” it is a sign that the system itself is under stress.
The National Taxpayer Advocate issues mid-year report to Congress made a similar point, with Collins warning that Operational risks remain a concern as the 2026 filing season approaches unless technology and staffing improve. Other watchdog commentary from WASHINGTON has emphasized that the national taxpayer advocate does not believe taxpayers should expect a smooth season, despite official assurances. Reports that New law, IRS workforce cuts raise red flags for tax season argue that inventory that is not worked in a timely manner can snowball into interest costs for the government and mounting frustration for filers. The throughline is clear: this is not just about waiting on hold a bit longer, it is about whether the government can reliably collect and refund trillions of dollars in a timely, secure way.
Who gets hurt most when the system slows down
When a complex system falters, its burdens rarely fall evenly. Low income filers, people with limited English proficiency, and those who rely on refundable credits like the Earned Income Tax Credit are particularly exposed to delays and errors. The IRS has tried to cushion that by having The IRS encourage all taxpayers to use online tools and by having the Taxpayer Advocate Service announce 2026 outreach to launch EITC Awareness Day, but awareness campaigns cannot substitute for staff who can fix a misapplied credit or clear a mistaken flag. Reports from WASHINGTON suggest that the national taxpayer advocate is especially worried about families who depend on refunds to cover rent, utilities, or car payments.
At the same time, higher income filers have more options. They can hire accountants, pay for premium software, or adjust their withholding to minimize refunds altogether. Analyses of IRS staff cuts note that The IRS reported having 20,692 taxpayer assistance employees, down from prior years, which means in-person help is scarcer just as the people who most need it are lining up. Another report on IRS challenges in 2026 tax season warns that filing a paper return could trigger trouble and that the 2026 tax season will test the agency’s ability to protect taxpayer return information. When I look at that disparity, I see a system where those with resources can route around the bottlenecks, while everyone else waits.
More From The Daily Overview
*This article was researched with the help of AI, with human editors creating the final content.
Julian Harrow specializes in taxation, IRS rules, and compliance strategy. His work helps readers navigate complex tax codes, deadlines, and reporting requirements while identifying opportunities for efficiency and risk reduction. At The Daily Overview, Julian breaks down tax-related topics with precision and clarity, making a traditionally dense subject easier to understand.
