The National Taxpayer Advocate’s latest annual report to Congress warns that significant workforce reductions and complex new tax laws present major challenges for the IRS heading into the 2026 filing season. But one senior Treasury official is confident in the agency’s readiness based on current leadership and staff. (IR 2026-15, 1/28/2026).
2025 Report Card and Filing Season Concerns
In her preface to the National Taxpayer Advocate’s 2025 Annual Report to Congress, Erin Collins expressed significant concern about the IRS’ ability to serve taxpayers in 2026. While acknowledging the successes of the 2025 filing season, she cautioned that “entering 2026, the landscape is markedly different.”
The 2025 filing season was relatively smooth for most taxpayers, with the IRS processing over 165 million individual returns and 63% of filers receiving an average refund of $3,167. However, despite this, the report found that millions of taxpayers faced substantial delays.
More than 33 million returns were suspended during processing, and about 3.6 million taxpayers received their refunds beyond the normal processing time, with an average wait of seven weeks for e-filers and 14 weeks for paper filers. The report also called the resolution time for identity theft cases “unconscionably long,” with the IRS ending fiscal year 2025 with an inventory of 316,000 cases that had taken an average of 21 months to resolve.
The report details a 27% reduction in the IRS workforce between January and December 2025, from over 102,000 employees to about 74,000. Collins noted the impact is “not merely numeric,” as many departing employees were experienced workers whose institutional knowledge and technical expertise cannot easily be replaced. The Taxpayer Services Division, which answers taxpayer telephone calls, saw its employee numbers reduced by 21%.
These reductions come in concert with the ongoing implementation of the One Big Beautiful Bill (OBBB), which featured more than 100 changes to the Tax Code, many retroactive to tax year 2025. Collins said the legislation was mostly taxpayer favorable, but include intricate eligibility rules, income thresholds, and phaseouts that the report warns “will be difficult for many taxpayers to understand and for the IRS to administer accurately.”
“The past year has been one of extraordinary transition for the IRS,” Collins wrote. “The agency began the year with its largest workforce in recent memory, and then … ended the year with one of its smallest. Reductions of this magnitude almost surely will affect operations.”
Treasury Nonetheless Optimistic
In a keynote address at the USC Gould School of Law Tax Institute January 27, Treasury Senior Policy Advisor Don Snyder expressed strong confidence in the agency’s preparedness. He asserted that the 2026 tax filing season began “on time and on schedule” thanks to the “strong leadership and efforts” of Treasury Secretary and acting IRS Commissioner Scott Bessent, IRS CEO Frank Bisignano, and Treasury Assistant Secretary Kenneth Keyes.
He attributed the timely start to the “countless other capable, dedicated, and engaged public servants” at the agency. Snyder then pointed to recent promotions of many new senior IRS leaders as evidence that the agency is in “truly in capable hands under Frank’s leadership,” with “further growth and positive change to come.”
Snyder also elaborated on the Treasury’s regulatory philosophy, stating that it is guided by a set of “bedrock principles.” These include a commitment to not “over-engineer” rules, a preference for flexible standards and safe harbors over rigid ones, and the use of targeted anti-abuse provisions that do not form the core of the regulatory structure.
He stressed that this approach favors minimizing compliance burdens and respecting practical realities. As an example, he pointed to the OBBB’s prohibited foreign entity provisions, which were designed to ensure federal energy tax incentives benefit domestic industries rather than foreign competitors. Technical feedback from the tax community on how the statute may present administrative challenges are most helpful for tailoring guidance when comments are as detailed and fact centric as possible.
According to Snyder, the Treasury Office of Tax Analysis estimated that the OBBB’s “overall benefits to individual taxpayers in 2026 alone will be around $220 billion, with around 133 million tax filers receiving an average tax cut of $936.”
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