A new congressional report warns that the Internal Revenue Service (IRS) may struggle to maintain service standards during the 2026 tax season due to recent funding reductions. As lawmakers debate the future of federal budgeting, the IRS finds itself at the center of a fiscal showdown that could affect millions of taxpayers nationwide.
Budget cuts reverse progress
According to the 2025 Joint Review Committee (JRC) report on IRS Operations, the agency’s discretionary budget authority declined by 9% year-over-year. This funding cut has already led to staffing shortages, project delays, and a rollback of critical modernization efforts.
The report notes:
- Seasonal hiring is down by 27%, particularly in roles focused on processing paper returns and fielding taxpayer calls.
- Funding reductions halted key information technology upgrades that were intended to speed up refund processing.
- Fraud detection and compliance enforcement programs are operating with reduced staff and outdated tools.
The JRC warned that recent IRS budget cuts now threaten to undo the reforms from 2023 and 2024, which had improved refunds, online services, and accuracy.
What this means for the 2026 tax season
The 2026 tax season could see slower refund timelines, reduced taxpayer assistance, and weaker enforcement against fraud and noncompliance. Key challenges the IRS is expected to face include:
- Delayed Refunds: With fewer staff and stalled automation projects, the average refund turnaround could extend by several weeks, especially for paper filers.
- Longer Wait Times: Call center wait times may exceed 45 minutes during peak periods. The IRS has already warned of reduced operating hours and limited appointment availability at walk-in centers.
- Reduced Enforcement: Audits and fraud investigations are being scaled back, potentially widening the tax gap and weakening compliance.
Technology setbacks add pressure
Prior to the cuts, the IRS had invested heavily in modernization through funding from the Inflation Reduction Act. Projects included expanding secure online taxpayer portals, developing mobile apps for underserved populations, and converting mailed forms to digital formats.
However, the JRC found that policymakers froze or reallocated over $400 million in planned modernization investments in 2025. The implications are serious:
- Contract delays have slowed down fraud detection upgrades.
- Officials canceled planned improvements to mobile access.
- The IRS is rolling out paper return scanning and data extraction tools at half their original scope.
These setbacks mean more manual work for a smaller workforce and a reduced capacity to detect identity theft, underreporting, and duplicate filings.
Political battle over IRS funding
The IRS’s budget has become a political flashpoint. House Republicans have sought to rescind large portions of the IRS funding granted under the Inflation Reduction Act, arguing that increased enforcement disproportionately targets middle-income Americans.
On the other hand, Democrats and the Treasury Department argue that sustained IRS investment is essential for closing the tax gap and improving taxpayer services. They cite data showing that each additional dollar invested in enforcement brings back an estimated $5 in recovered revenue.
This budget tug-of-war has destabilized the agency, leaving staff and contractors uncertain about long-term funding.
Who will be most affected?
While all taxpayers may feel the effects of a less-resourced IRS, some groups will be hit harder than others:
- Low-income filers: Often rely on in-person IRS support and may lack access to online filing tools.
- Older taxpayers: More likely to file by mail and need assistance with return preparation.
- Non-English speakers: May face longer delays in reaching multilingual assistance lines.
Additionally, tax preparers, accountants, and Volunteer Income Tax Assistance (VITA) sites may face increased pressure to fill service gaps typically handled by the IRS.
Taxpayer tips for avoiding delays
Experts recommend that taxpayers take steps now to minimize IRS-related disruptions in 2026:
- File electronically: This ensures the fastest processing and refund turnaround.
- Use direct deposit: Refunds are issued faster and more securely.
- Double-check your return: Errors can trigger costly delays and audits.
- Get help early: Don’t wait until March or April to seek assistance.
- Use IRS online tools: The IRS website offers refund trackers, transcript access, and identity protection resources.
What’s next for the IRS?
The JRC report urges Congress to reevaluate its approach to IRS funding. It recommends restoring at least $500 million in staffing and modernization resources to prevent systemic disruptions in 2026.
Meanwhile, the Treasury Department has called for a “stabilization package” to protect core services during the next tax season. Whether lawmakers will act remains to be seen.
Key takeaways
- IRS faces reduced funding, staffing, and modernization due to 2025 budget cuts.
- The 2026 tax season could see delayed refunds, longer wait times, and reduced enforcement.
- Vulnerable populations will feel the greatest impact.
- Experts urge taxpayers to prepare early, file electronically, and use digital tools.
- Congressional action could determine whether IRS services rebound or deteriorate further.
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