How IRS Workforce Reduction Could Impact You

You may have read recent headlines about IRS workforce reductions. 

You might not think much about IRS staffing or funding—until it starts affecting your tax return, refund, or ability to resolve an issue.

During Covid, we saw firsthand what happens when the IRS struggles to keep up with demand: long wait times, lost correspondence, destroyed tax filings, and frustrating delays in everything from tax refunds to transcript requests.

The root cause of these issues is clear – decades of increased tax complexity added on top of legacy data systems. Regardless of political party, Congress has repeatedly chosen to make taxes harder to understand & comply with while not helping the IRS fulfil its obligation of ensuring taxpayer compliance.

What might happen next with IRS workforce reductions is up for speculation. Here’s our best guess based on decreased service in recent years.

Longer Processing Times & Delays

• Refund delays: If you’re expecting money back from the IRS, it could take significantly longer to arrive than you’re accustomed to. Many people file tax returns outside of the more traditional January – April time window, so this is a year-round concern.
• Loan friction: Many lenders require IRS transcripts to verify income. If those take weeks or months to process, your loan or refinancing approval has another friction point to overcome.
• IRS notices dragging on: If you receive a tax notice, resolving it may take months instead of weeks due to processing backlogs and unanswered inquiries. We’ve seen routine tax matters take even years to push through the IRS, often resulting in congressional involvement to push through the system. Essentially, the squeaky wheel gets the grease but there’s still only so much grease.

Fewer Ways to Get Help, With Less Helpful Outcomes

Reaching the IRS isn’t easy. With service declines, it will be harder.

• Longer phone wait times. During Covid, it was often impossible for taxpayers and tax professional alike to reach the IRS via phone. At first phone lines were answered after 30-60 minutes on hold. This then moved to hang ups. This then moved to phone calls not being answered at all. For days, weeks at a time. The IRS continued to send taxpayers notices stating to call the IRS, but then those same phone lines were shut down. Expect to see more of this.
• Mailed documents taking months to process. During Covid, the IRS self-admitted it shredded ~30 million taxpayer paper-filed documents. Since then, IRS’ improvement for receiving and processing information electronically has improved only marginally. The IRS continues to require paper filings of certain tax returns and much taxpayer correspondence. Less IRS workforce means your correspondence sits longer, possibly never being processed at all.

Higher Costs for Taxpayers

When the IRS is harder to reach and updates to taxpayer accounts take longer, resolving tax issues takes more time—and that can mean higher costs for professional assistance. If simple matters drag on due to processing delays, it can require extra follow-ups, resubmissions, and back-and-forth communication, all of which add complexity and cost.

What’s Next

Ideally the US government works to reduce tax complexity + ensure the IRS has adequate staff and systems to administer the federal tax system in a way that supports taxpayers.

We’ll be keeping a close watch on developments to IRS changes and communicate them to you.