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Meanwhile, the agency faced layoffs from Elon Musk’s so-called Department of Government Efficiency (DOGE), as well as other layoffs in 2025. A September report from the Treasury Inspector General for Tax Administration (TIGTA), an independent federal agency, said the cuts included 17% to 19% of “key IRS business” during the filing season.
Many key filing season positions have been exempted from cuts in early to mid-2025. However, the cuts could impact “key processing programs and customer services” in the future, the report said.
What IRS budget cuts mean for taxpayers
The agency’s budget for this year could also be reduced as Congress finalizes spending decisions. The bipartisan agreement announced in January would provide $11.2 billion for the remainder of fiscal year 2026, about 9% less than the $12.3 billion in the 2025 IRS budget.
Another TIGTA report in October said, “It will be difficult for the IRS to complete IT modernization projects, provide quality service to taxpayers, and enforce tax laws with reduced staffing and budgets.”
Amid recent job cuts, “taxpayers may have to increasingly rely on the IRS’s self-service tools,” the report says. However, the number of IRS online account users continues to grow, topping 51 million in 2025, an increase of 12 million from 2024.
Impact of Trump tax cuts on filers
Holtzblatt said one of the “biggest challenges” for the IRS is implementing President Trump’s changes to the tax code, particularly the deductions for tips, overtime pay and auto loan interest.
The U.S. Treasury Department has been updating its guidance for months, but “the law is complex,” he said. Exempting employers from reporting tips and overtime deductions would create “an additional burden on taxpayers,” he said.
In early January, Treasury Secretary and Acting IRS Administrator Scott Bessent issued a statement saying the Treasury Department was “diligently preparing to update our documentation and procedures” ahead of the passage of President Trump’s bill.
When taxpayers can receive a refund
Another issue policy experts are watching is how quickly applicants will receive their refunds this season.
Taxpayers could get even bigger refunds in 2026 under the Trump administration’s changes enacted in 2025. Without updated information on payroll withholding, many people may benefit when they file their 2026 returns. The average refund for individual filers in 2025 was $3,052 through Oct. 17, according to IRS data.
Holtzblatt said taxpayers who filed accurately electronically should receive their refunds “in a timely manner.” However, returns filed on paper or those that have been “flagged in processing” due to errors may take longer. According to the IRS, electronically filed personal tax returns are typically processed within 21 days.
But he said the new deduction increases the opportunity for calculation errors, which could cause the IRS to flag the return and delay refunds.
