Category: Blog

Picture two things happening at the same time. The agency responsible for reviewing your tax return is understaffed and buried under a backlog, and the software that the agency uses to catch filing errors just keeps getting better.

That combination should give any taxpayer pause this season. Not because an audit is necessarily coming, but because if something does go wrong, the window for getting it resolved quickly has shrunk considerably.

The IRS Is Running Lean, But It’s Technology Isn’t

The agency lost more than a quarter of its workforce in 2025. The National Taxpayer Advocate’s most recent annual report to Congress documented the drop: from roughly 102,000 employees to about 74,000. Those departures, through a mix of voluntary exits and layoffs, spread across nearly every division.

Funding took a hit at the same time. Congress reversed a significant portion of the IRS budget boost approved through the Inflation Reduction Act, pulling back billions earmarked for enforcement and technology investment. A government shutdown that stretched across October and November of last year piled further delays onto an already strained system. The Treasury Inspector General for Tax Administration confirmed in a January report what tax practitioners were already seeing firsthand: a serious backlog in the processing of amended returns and taxpayer correspondence.

Here’s the part that catches people off guard. None of that has slowed the IRS’s ability to spot problems on your return. The agency’s systems cross-reference what you report against data received independently from employers, brokers, and financial institutions. Artificial intelligence and expanded automation have made error detection faster and more precise, staffing levels notwithstanding.

Fewer people are available to handle problems once they surface. But the technology responsible for finding those problems is running better than ever.

What This Looks Like in Practice

Tax professionals working with real clients are the best window into what this means day to day. Advisors report receiving IRS notices today that are resolving matters dating back to 2023, showing a multi-year lag on what should be routine correspondence. The practical response among preparers has been to tighten processes and leave less to chance.

Some advisors have added specific safeguards, such as obtaining power of attorney to monitor clients’ IRS online accounts directly rather than waiting for slow paper notices. Others describe the current environment plainly: the cost of needing to amend a return has gone up, not necessarily in dollars, but in time and uncertainty.

A poll of tax and financial advisors conducted during a recent industry webinar found that every respondent is maintaining at least the same level of care they applied when IRS staffing was at full strength. Nearly half said they are actively raising the bar this season.

What You Should Do Differently

Here are a few practical steps worth taking seriously this year:

• Give your preparer complete and accurate information. Incomplete or inconsistent reporting is where most errors begin, and those errors are exactly what the IRS’ matching systems are built to catch.
• If you are claiming something new on your return, ask your preparer to walk you through the basis for it. Understanding what you are filing and why is reasonable.
• Set up an IRS online account at IRS.gov if you haven’t already. You can monitor your filing status, review transcripts, and spot potential issues before they become formal notices.
• And if something does go sideways, respond early. Letting a notice sit without a response doesn’t slow the IRS down. It just costs you time you don’t have.

Conclusion

The agency may be a smaller operation than it was a few years ago. But the part of it designed to find mistakes on your return is still very much running.

Tax season is here, and while the IRS opened its doors for 2025 returns on Jan. 26, with the familiar April 15 deadline intact, this year’s filing experience is shaping up to be anything but routine. A perfect storm of workforce cuts, rushed new tax breaks, and strained systems means that getting your return right the first time has never been more important.

A Smaller IRS With a Bigger Job

The numbers tell a sobering story. According to the Taxpayer Advocate, the IRS entered this filing season with 27 percent fewer employees than it had just a year ago. Congressional funding clawbacks combined with the Department of Government Efficiency’s push for retirements and reductions have hollowed out the agency’s capacity at nearly every level.

The Treasury Inspector General for Tax Administration warned that the IRS could struggle this year, noting that by Dec. 30, 2025, the agency had managed to onboard only two percent of the employees it was authorized to hire for submission processing. The culprits? New hiring procedures imposed by the Trump Administration and delays stemming from last year’s record 43-day government shutdown.

What does this mean for you? Automated systems will continue handling straightforward electronic returns efficiently. But anything requiring human attention, whether that’s an amended filing, identity verification or a return flagged for errors, will move at a crawl. Phone lines will be even harder to get through than usual, if you can get through at all.

New Deductions, New Confusion

Adding complexity to an already strained system, the One Big Beautiful Bill Act that President Trump signed in July introduced a set of temporary tax breaks that took effect retroactively for 2025. These include deductions for tips, overtime, seniors, and car loan interest, all requiring new forms, schedules and guidance that had to be produced in a hurry.

The potential for mistakes is significant, especially for the 45 percent of filers who prepare their own returns. Most 2025 W2 forms will not break out overtime pay separately, leaving taxpayers to figure it out themselves. And despite the political rhetoric around “no tax on Social Security,” the reality is a larger deduction for seniors that phases out as income rises. Some recipients may not realize they still need to report their benefits as taxable income.

The SALT cap increase from $10,000 to $40,000 is good news for many, but it also means taxpayers should take a fresh look at whether itemizing now makes more sense than claiming the standard deduction.

Direct Deposit or Prepare to Wait

The IRS is pushing hard for electronic refunds, and for good reason. Most error free, electronically filed returns with direct deposit are processed within 21 days. But if you prefer a paper check or accidentally provide incorrect bank account information, expect a much longer wait with fewer staff available to sort out problems.

Returns sent by mail? Plan on six weeks or more. Amended returns are averaging five months or longer, and the IRS is already working through an elevated backlog from prior years.

The Bottom Line

Accuracy matters more than speed this year. The system still works well for straightforward, completely correct returns, but it is far less forgiving when something goes wrong. If you are uncertain about how to handle one of the new deductions or think you might be missing documentation, filing for an automatic extension is a smarter move than submitting a return with errors.

File electronically. Double-check every entry. Use direct deposit. And if your situation is at all complicated, seek out a tax professional who can help you navigate a filing season where the margin for error has never been thinner.