The US IRS has released the National Taxpayer Advocate’s 2025 Annual Report, highlighting strong taxpayer service last year but warning that the 2026 filing season faces major challenges due to a 27% workforce reduction, leadership turnover, and the rollout of complex retroactive tax law changes under the OBBB Act.
The US Internal Revenue Service (IRS) released the National Taxpayer Advocate’s 2025 Annual Report to Congress on 28 January 2026, assessing IRS performance over the year and identifying potential risks for 2026.
The report notes that taxpayer services remained strong in 2025, aided by an expanded workforce and the lack of major new tax legislation, resulting in smooth filings and timely refunds for most taxpayers.
“Among the reasons the 2025 filing season went well was that the IRS had its largest workforce in many years and faced no major tax law changes that required implementation during the filing season,” Collins writes. “Entering 2026, the landscape is markedly different. The IRS is simultaneously confronting a reduction of 27% of its workforce, leadership turnover, and the implementation of extensive and complex tax law changes mandated by the [One, Big, Beautiful Bill] Act, many of which apply retroactively and require significant IRS programming, guidance, changes to tax forms and instructions, and taxpayer education.”
Despite these challenges, Collins says most taxpayers will be able to file their returns and receive their refunds without delay. “For the significant majority of taxpayers who file their returns electronically, who include their direct deposit information, and whose returns are not stopped by IRS processing filters, the process will be seamless,” she writes. “Their returns will be processed quickly, and if they are due a refund, they will receive it without delay.” However, she notes “the success of the filing season will be defined by how well the IRS is able to assist the millions of taxpayers who experience problems.”
Taxpayer service in 2025
During 2025, the IRS processed more than 165 million individual income tax returns. About 94% were submitted electronically, and 6% (about 11 million) were filed on paper. Approximately 104 million taxpayers (63%) received refunds, with an average refund amount of USD 3,167. While most refunds were issued timely, about 3.6 million taxpayers received their refunds beyond the IRS’s normal processing time, with an average wait time of seven weeks for e-filers and 14 weeks for paper filers.
In addition, longstanding delays in resolving identity theft victim assistance cases persisted during 2025, with hundreds of thousands of taxpayers waiting an average of more than 21 months for the IRS to resolve their cases and issue refunds due. Particularly for lower income taxpayers, these delays can create or exacerbate financial hardships. Collins has previously called these delays “unconscionable,” and her report reiterates a prior recommendation to keep IDTVA employees focused exclusively on identity theft casework until the average case resolution time is reduced to 90 days.
2026 filing season challenges
Among the reasons the 2025 filing season went well was that the IRS had its largest workforce in many years and faced no major tax law changes that required implementation during the filing season. Entering 2026, the landscape is markedly different. The IRS is simultaneously confronting a reduction of 27% of its workforce, leadership turnover, and the implementation of extensive and complex tax law changes mandated by the OBBB Act, many of which apply retroactively and require significant IRS programming, guidance, changes to tax forms and instructions, and taxpayer education.
Staffing reductions have been significant. In January 2025, the IRS workforce consisted of more than 102,000 employees. By December, that number had been reduced to about 74,000 employees. The impact of these departures is not merely numeric. Many departing employees were experienced workers whose institutional knowledge and technical expertise cannot easily be replaced.
