The 2026 tax season presents unprecedented challenges for taxpayers as IRS budget cuts and workforce reductions heighten the importance of accurate tax returns. According to tax advisors, while the agency’s staffing has shrunk dramatically, its advanced computer systems continue to detect errors more efficiently than ever, creating a perfect storm where mistakes are caught quickly but take years to resolve. Experts warn that extreme diligence with federal tax returns has become critical during this tax season.
Recent reports from the Treasury Inspector General for Tax Administration reveal an unusually long backlog in processing amended tax returns and taxpayer correspondence. Meanwhile, the National Taxpayer Advocate’s annual report to Congress disclosed that the IRS workforce plummeted from approximately 102,000 employees in 2024 to just 74,000 in 2025, representing a 27% reduction in force.
Budget Cuts Compound Staffing Challenges
The dramatic workforce exodus at the IRS has been accompanied by significant budget reductions under the current administration. Congress has revoked billions of dollars in additional IRS funding that was approved under the Biden-era Inflation Reduction Act, which was primarily designated for tax enforcement and modernization initiatives. Additionally, the longest government shutdown in history during October and November of last year further worsened the work backlog at the agency.
According to CPA Stephanie Bucko, co-founder of Mana Financial in Los Angeles, the delays are substantial. “We’re getting notices now that things are getting resolved from 2023 because there’s such a big backlog at the IRS,” she said during a recent webinar on the 2026 tax season. She noted that many clients are asking questions about these delays, prompting her firm to adopt even stricter standards for accuracy.
Advanced Technology Catches Errors Despite Staffing Reductions
Despite reductions in personnel and funding, the IRS maintains sophisticated technology for error detection. The agency’s computer systems effectively catch mistakes on tax returns by matching them with third-party filings such as Form 1099-B from brokers and Form W-2 from employers. The expanded use of artificial intelligence and other technologies will enable the IRS to identify more errors faster than before.
However, this creates a problematic situation for taxpayers. Mistakes on tax returns are now more likely to trigger IRS attention and penalties, yet resolving these issues could take considerably longer due to reduced staffing levels. This juxtaposition represents what experts describe as the worst of both worlds for taxpayers navigating the system.
Tax Advisors Recommend Heightened Diligence
Tax professionals across the country are responding to these challenges by intensifying their attention to detail. “If anything, this is the time to be more diligent, to prevent that hassle of going back and having to amend things and waiting a couple of years to see where that lands,” cautioned Josh Radman, CFP and Enrolled Agent at Presidio Advisors in Denver. He emphasized the importance of paying extra attention during the current tax season.
A poll conducted during the webinar revealed that all attending tax and financial advisors are maintaining at least the same level of meticulousness as when the IRS operated at full capacity. Nearly half reported they are actually redoubling their diligence efforts this year. Bucko explained her approach: “We want to make sure everything is reconciled and correct the first time because the back and forth with the IRS has been a real pain.”
Strategies for Navigating IRS Delays
Some tax professionals have developed specific strategies to manage the challenges posed by IRS staffing reductions. Dan Hodgin, CPA at Silicon Valley Tax Group, explained his proactive approach: “I like to have access to all of my clients’ IRS online accounts, with power of attorney. That lets me look in and see what the IRS has done or hasn’t done so that when I am corresponding, and I know there is going to be a big backlog, I can get a little more information a little faster.”
The situation particularly affects taxpayers with complex returns involving equity compensation, stock options, restricted stock units, and employee stock purchase plans. These returns require careful reconciliation with broker statements and employer documentation to avoid triggering automated IRS error detection systems. Tax experts emphasize that errors involving these forms of compensation can be especially time-consuming to resolve given current IRS processing delays.
As the tax filing deadline approaches, the full impact of IRS staffing and budget cuts on processing times and taxpayer services remains to be seen. However, uncertainty about future congressional funding decisions and potential additional workforce reductions suggest these challenges may persist beyond the current tax season.
