IRS Funding Cuts Raise Questions About Refunds and Support
IRS funding cuts and recent staffing reductions are raising new questions about whether taxpayers will see slower refunds or face longer waits for help during the 2026 filing season. Official IRS statements, Treasury data, and government watchdog reports show a mixed picture, with automated refunds continuing for some filers while paper processing and customer service remain under pressure.
The Internal Revenue Service has said that refund timing depends heavily on how a return is filed and processed, particularly during periods of limited operations or staffing constraints. In a public statement addressing operations during a lapse in appropriations, the IRS said refunds will generally not be paid, but outlined a significant exception for certain filers.
According to the IRS, refunds may continue for taxpayers who file Form 1040 electronically, have error-free returns, and have refunds processed automatically and issued by direct deposit. The agency said these returns can move through systems even when other operations are restricted.
Paper returns, by contrast, are not included in that exception. The IRS said processing of paper-filed returns would be delayed until full operations resume, reflecting their reliance on manual handling and staffing. Live phone assistance may also be limited during such periods, though automated online tools typically remain available.
Recent Treasury Department data highlights how staffing and funding levels have shaped IRS performance in prior filing seasons. In its 2024 filing-season report card, Treasury said the IRS reached an 88 percent phone level of service with average wait times of about three minutes, a sharp improvement from earlier years.
Treasury explicitly linked those results to additional resources provided in recent years. The department contrasted the 2024 outcomes with the 2022 filing season, when service levels were significantly lower, and millions of refunds were delayed for months.
IRS operational statistics released in its Fiscal Year 2024 Data Book further show the scale of recent activity. The agency reported that nearly 20 million callers received live phone assistance during FY2024 and that the IRS issued hundreds of billions of dollars in refunds. These figures reflect capacity under higher staffing levels, not a guarantee for future seasons.
Government oversight agencies have cautioned that staffing reductions and unfinished inventories heading into 2026 could affect processing timelines, even if automated systems continue to function.
In a Jan. 26, 2026, readiness memo, the Treasury Inspector General for Tax Administration said IRS staffing levels had fallen back to approximately October 2021 levels following workforce reductions. At the same time, the watchdog reported that inventories of unprocessed work had increased across key functions.
TIGTA stated that inventory carried into the filing season may affect the IRS’s ability to process tax returns, potentially delaying taxpayers' refunds. The report emphasized that these findings reflect operational risk rather than a confirmed outcome for all filers.
The same TIGTA memo reported slow onboarding progress in the submission processing process. As of late December 2025, the IRS had onboarded 50 of 2,200 approved hires in that function, with training timelines likely limiting early-season readiness.
TIGTA also noted that the IRS planned to lower its filing-season telephone-level service target to 70 percent, down from 85 percent in the prior season. The agency cited staffing and resource constraints as factors in resetting expectations.
Separate analysis by the Government Accountability Office highlights longstanding challenges in paper processing that persist regardless of automated refund performance.
In its review of the 2024 filing season, GAO reported that the IRS processed most returns overall but failed to meet its own goal for individual paper returns. GAO said paper returns took an average of 20 days to process, compared with a 13-day goal referenced in its summary.
GAO also found that taxpayer correspondence delays continued, with a substantial share of mail classified as late by the end of the filing season. These findings underscore the vulnerability of manual workflows to staffing shortages and backlogs.
While IRS phone service statistics are often cited publicly, TIGTA has reported that commonly used metrics do not capture the entire taxpayer experience.
In a 2025 audit, TIGTA said the IRS’s widely reported level of service and average wait time figures covered only specific accounts management phone lines. Other lines, including those handling specialized issues, were excluded and often experienced longer wait times. TIGTA pointed to a broader enterprise measure that includes more phone lines and shows different results.
GAO has also reported uncertainty about the future of certain IRS services and modernization initiatives amid funding changes. In a taxpayer experience report released in 2025, GAO said the IRS had been implementing improvements funded by the Inflation Reduction Act but began reassessing which projects to continue as funding and staffing levels changed.
The report did not specify which projects would be paused, scaled back, or replaced, leaving open questions about how quickly service enhancements could be sustained or expanded.
Taken together, government sources point to two realities. Automated systems allow many refunds to move quickly, but staffing-dependent functions remain strained.
Taxpayers who file electronically, avoid errors, and choose direct deposit are most likely to remain in the fastest refund pathway. Returns that require manual review, identity verification, amendments, or paper processing are more exposed to delays tied to staffing and inventory backlogs.
Access to live assistance may also vary depending on the issue and phone line involved. Headline service metrics do not guarantee short wait times across all types of taxpayer inquiries. For filers who anticipate complications, early filing and use of online tools may help reduce delays.
By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now
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