Watchdog Warns IRS May Struggle During The 2026 Tax Filing Season

The Treasury Inspector General for Tax Administration (TIGTA) has released a memorandum outlining concerns about the IRS’s readiness for the 2026 filing season. Citing staffing reductions and growing inventories, TIGTA suggests the filing season could be challenging—a concern shared by many tax professionals.

The 2026 Tax Filing Season

This week the IRS opened the 2026 tax filing season and began accepting and processing federal individual income tax returns for tax year 2025. The agency expects approximately 164 million individual tax returns for tax year 2025 to be filed ahead of the April 15 federal deadline.

The purpose of TIGTA’s review is to identify operational risks that could affect the IRS’s ability to process tax returns, issue refunds on time, and provide adequate service to taxpayers. TIGTA’s assessment makes clear that the filing season will begin under strained conditions, shaped by large processing backlogs, reduced staffing, hiring and training delays, and incomplete modernization efforts.

Tax Return Inventory

As of December 2025, the IRS reported approximately two million individual tax return items in inventory, including amended returns, taxpayer correspondence, paper-filed returns, rejects, and unpostable transactions. If that number sounds big, it is. Inventory levels as of December 2025 were 129% higher than pre-pandemic levels.

According to TIGTA, the size of the inventory reflects the effects of operational disruptions over several years, including the pandemic and the record-setting federal government shutdown that lasted from October 1 through November 13, 2025. The backlog now includes more than a half-million amended tax returns and nearly 300,000 paper returns. (These numbers do not include corporate, partnership, or other non-individual returns.)

TIGTA warns that these backlogs pose a substantial risk of delayed return processing and refunds during the 2026 filing season, which, in turn, may expose the government to significant interest costs. In recent years, the IRS has paid billions of dollars in interest on delayed refunds.

(You can read more here about the post-shutdown backlogs.)

IRS Staffing Issues

IRS staffing shortages have compounded inventory challenges. As of October 2025, overall IRS staffing levels had declined by roughly 19%, or about 19,000 employees, thanks to Department of Government Efficiency (DOGE) cuts and Congressional clawbacks of billions of dollars in Inflation Reduction Act (IRA) funding. (The Trump administration has since proposed even more dramatic cuts but Congress has so far resisted, offering instead a more modest trim.)

As a result, staffing in critical filing-season functions returned to pre-IRA funding levels—effectively 2021 levels—with a few departmental exceptions.

How did those staffing issues affect service?

The Submission Processing function, which processes original and amended tax returns and resolves errors, had 1,626 fewer employees (17%) in 2025 than in October 2021. The department received approval to hire 2,200 employees for the 2026 filing season, including tax examiners and clerks. However, as of December 30, 2025, the Submission Processing function had onboarded only 50 of the 2,200 employees (2%) it was approved to hire. Training new employees can take 60 to 80 days, so even if onboarded, many may not be ready to assist during the 2026 filing season.

Why the delay? Red tape. Despite having direct-hire authority for filing-season positions, the IRS was delayed in posting job announcements due to a new hiring process. The new process requires approval to hire from both the IRS Chief Executive Officer and the Department of the Treasury before announcements can be posted. Selections must also be approved by the IRS Chief Executive Officer and the Department of the Treasury before employment offers can be made. Although the Submission Processing function was able to announce open positions during the shutdown, it could not conduct in-person direct-hiring events at that time. However, the IRS was able to conduct an in-person hiring event in January 2026.

The Accounts Management function, which handles taxpayer phone calls and correspondence, had 2,028 more employees in 2025 than in October 2021, an increase of 12%. Even so, the pace and timing of hiring forced the IRS to cut back on training. Typically, the department onboards new hires no later than August 31 to ensure employees are fully trained and ready by January 1. Because approval was not received until August 2025, training for new employees was modified to ensure that as many as possible were ready to assist taxpayers during the filing season.

As a result, many newly hired employees will be limited to handling only basic inquiries, such as call routing or simple account issues, rather than resolving more complex taxpayer problems. To compensate, the IRS anticipates relying heavily on overtime—a strategy that may help maintain coverage but also increases costs and the risk of employee burnout.

Taxpayer Service Levels

Taxpayer service levels are expected to reflect these staffing realities. For the 2026 filing season, the IRS plans to lower its telephone service level (LOS) goal to 70%, down from the 85% target used in recent years. TIGTA notes that the IRS has not achieved a 70% service level since 2022, when call volumes spiked and service levels collapsed.

The LOS refers to how efficiently telephone systems manage incoming calls, specifically measuring how quickly a caller can reach a representative. A high LOS indicates effective call handling, while a low LOS reflects longer wait times. According to the IRS, the LOS measures the ability of a taxpayer to reach a telephone assistor when requested.

For the 2024 tax filing season, the Treasury Secretary set a goal of achieving an 85% LOS and average wait times of less than five minutes. The IRS reported that it achieved both of those goals in 2024, likely thanks to the addition of 5,000 new telephone assistors.

(You can read more about TIGTA’s most recent report on phone service at the IRS here.)

Although IRS leadership has indicated an intent to revise how it measures service—by incorporating digital and multi-channel interactions—the memo cautions that taxpayers who rely on traditional phone assistance may still face long wait times and difficulty reaching trained representatives.

In-person assistance also remains vulnerable. During the government shutdown in October 2025, all 362 Taxpayer Assistance Center (TAC) offices were closed. While they have since reopened, operating status can vary day to day due to illness or staff moving to other positions within the IRS.

TIGTA warns that reductions in the number of open TAC offices could result in fewer taxpayers being served during the 2026 Filing Season. As of May 3, 2025, the IRS assisted nearly 1 million taxpayers in person at a TAC office. Additionally, approximately 27 TAC offices were closed temporarily or were not staffed, a number that ticked up to 35 TAC offices by December 2025.

Lack Of Tech Readiness

The memorandum also raises concerns about information technology readiness. The IRS’s IT workforce has declined by roughly 16%, limiting the agency’s capacity to develop, test, and deploy system updates required for the filing season. These systems must accurately reflect current tax law and ensure stable return processing. TIGTA warns that staffing losses increase the risk that not all systems will be fully ready or thoroughly tested before the season begins.

The IRS’s modernization initiatives, intended to offset staffing shortages and improve efficiency, are progressing—but not quickly. For example, the IRS’s Zero Paper initiative, which aims to reduce paper use, has so far captured only a small fraction of paper returns. As of December 6, 2025, vendors had scanned and digitized approximately 379,000 (4%) of the 10.7 million Form 1040 paper-filed tax returns.

Automation tools for amended return processing are still being rolled out and will not be fully operational in time to meaningfully reduce backlogs. Amended returns continue to be processed by humans, even when they are received electronically.

The Taxpayer 360 project—an AI-enabled, unified case-management system designed to give employees a comprehensive view of taxpayer accounts—has also encountered technical issues and delays, with full deployment now scheduled well after the filing season concludes. According to TIGTA, users in the pilot program have reported bugs, along with enhancement requests and other issues that require remediation before a larger-scale release.

What’s Next

TIGTA advises that the IRS is entering the 2026 tax filing season facing elevated operational risk. Significant inventory backlogs, reduced staffing, delayed hiring and training, lowered service expectations, and incomplete modernization efforts increase the likelihood of slower return processing, delayed refunds, and diminished taxpayer service. While the IRS has plans in place to mitigate these challenges, TIGTA cautions that many of those plans will not be fully realized in time to materially improve the taxpayer experience during the 2026 filing season.

About TIGTA

TIGTA was established in January 1999 by the IRS Restructuring and Reform Act of 1998 to provide independent oversight of IRS activities. Today, TIGTA provides audit, investigative, and evaluation services to promote integrity, efficiency, and economy in the administration of the nation’s tax system. While TIGTA is organizationally situated within the Department of the Treasury and reports to both the Secretary of the Treasury and Congress, the agency is considered independent.

You can read the TIGTA memo here.