The IRS has launched a “zero paper initiative” to expand scanning and digital processing of paper-filed tax returns designed to mitigate the impact of some of the staffing losses on the 2026 filing season, but that initiative “is already delayed,” the report says. Image: Stone' s Throwe Photo/Shutterstock.com
Staff cuts at the IRS “had no significant impact” on the tax filing season earlier this year because exceptions were made for critical positions for much of that period, an IG report has said, but the agency “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.”
“Key IRS functions responsible for managing the filing season have lost 17 to 19 percent of their workforce,” it said, citing submission processing, return integrity compliance services, accounts management and field assistance.
Among the potential impacts of staff cuts in those areas are “delays in taxpayers receiving refunds which can result in the IRS paying interest”; allowing an additional 24,000 returns claiming $360 million in fraudulent refunds to slip through; allowing the inventory of pending adjustments to returns to exceed the levels of the pandemic; and providing personal assistance to 169,000 fewer taxpayers.
The IRS has launched a “zero paper initiative” to expand scanning and digital processing of paper-filed tax returns designed to mitigate the impact of some of the staffing losses on the 2026 filing season, but that initiative “is already delayed,” the report says.
“Staffing losses in the IRS’s information technology function and recently enacted legislation create additional challenges for the IRS as it prepares for the 2026 filing season,” it adds. “The One Big Beautiful Bill Act will require the IRS to make substantial changes ahead of the 2026 filing season, but the agency will have fewer information technology resources to timely update processing systems.”
The IRS has determined that it would need to hire 3,500 new employees to achieve an 85 percent toll-free telephone level of service during the 2026 filing season, as well as additional staff to process paper-based returns if its goals under the zero paper initiative are not met.
“However, most IRS functions remain under an indefinite hiring freeze and the opportunity to hire and train the people it would need for the 2026 filing season is quickly closing,” it says. “For example, IRS management stated that they would need to begin onboarding employees in October 2025 to have them trained before the start of the 2026 filing season.”
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