Job cuts mean strong 2025 tax season may be hard to repeat, IRS watchdog warns

The 2025 tax filing season went smoothly with the IRS processing more tax returns than in the previous year and exceeding its level-of-service (LOS) goal set for answering phone calls, a government watchdog said in its review of the agency’s work.

And even though the IRS began reducing its workforce in January, people in critical filing season positions stayed on the job, helping the agency to operate effectively during tax season, the Treasury Inspector General for Tax Administration (TIGTA) said in the report, dated Sept. 29.

That effectiveness is unlikely to be duplicated next year, the report said.

“Although the 2025 filing season was not impacted, the IRS is beginning to see the effects of the workforce reduction on post-filing season activities, and we are concerned how this will impact the 2026 filing season,” the report said.

For the 2025 filing season, the IRS processed more returns (142.2 million) than in 2024 (139.9 million) and exceeded its 85% LOS goal for the filing season on its telephone lines, the report said.

Key IRS functions responsible for managing the filing season have lost 17% to 19% of their workforce, the report said. And the program to mitigate the staffing loss, the Zero Paper Initiative, is already delayed, the report said.

The initiative, which began in April, was created to convert paper submissions into streamlined digital processes and mitigate the effect of less staff, TIGTA said. For the 2026 filing season, the initiative focused on three forms that represent 78% of forms filed on paper.

But the contractor has returned 600,000 of the 800,000 returns that the IRS sent to it because it was not able to process them on time, TIGTA said. More staff will be needed to finish that job, according to the report.

The IRS’s Taxpayer Services Division has been allowed to hire about 3,500 employees to achieve its goal of 85% telephone LOS for the 2026 filing season, the report said.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.