Taxpayers may face a turbulent 2026 filing season as a result of deep IRS staffing cuts and new legislative changes linked to the Trump administration’s latest budget proposals. According to a report released June 26, 2025, by National Taxpayer Advocate Erin Collins, the Internal Revenue Service has lost over 25,000 employees in the past year—just as it braces for complex retroactive tax changes that will affect the upcoming season.
IRS headcount falls 26% under Trump administration
The IRS workforce shrank from 102,113 to 75,702 by June 2025. Over 17,500 employees accepted early resignation buyouts under a “deferred resignation program” tied to President Trump’s Department of Government Efficiency (DOGE), led by Elon Musk.
The hardest-hit areas include:
- Taxpayer services
- Small business/self-employed divisions
- Information technology teams
This sharp reduction—paired with a proposed 20% budget cut and the stripping of Inflation Reduction Act funds—amounts to a 37% funding loss compared to last year.
What this means for the 2026 tax season
The 2025 filing season was described as “one of the most successful in recent memory,” but the outlook for 2026 is less optimistic. Collins warned that the agency is months behind on key hiring and training efforts, jeopardizing its ability to serve taxpayers effectively next year.
The 2026 season could see:
- Longer refund delays
- Slower return processing
- Reduced call center support
- More errors with new tax law changes
Legislative changes complicate the picture
Trump’s proposed tax package—informally dubbed the “One Big, Beautiful Bill”—would introduce major changes that retroactively impact 2025 taxes, including:
- Disallowing Employee Retention Credit claims after Jan. 31, 2024
- Eliminating the IRS Direct File pilot program
- Triggering system and form updates under extreme time pressure
Tax experts note that the IRS traditionally sees higher call volumes and taxpayer confusion following years with major tax law shifts.
Identity theft backlog persists
The report also highlights ongoing struggles with identity theft case resolutions:
- 387,000 cases unresolved as of June 2025
- Average resolution time: 20 months
Collins called this delay “unacceptably long,” particularly for low-income taxpayers depending on refunds for essentials.
What’s next?
The IRS must act fast:
- Hire and train thousands of seasonal and permanent staff
- Update IT systems to handle new tax codes
- Prepare for increased taxpayer inquiries and filings
The Treasury Department has requested $852 million in emergency funding, but its approval depends on upcoming Congressional action—expected just before the July 4 recess.
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