IRS Budget Cuts Could Slow Tax Season in 2026: Could You Be Affected?

image of IRS sign with red traffic light in the foreground

(Image credit: Getty Images)

The 2026 tax filing season officially began on January 26, and it was already shaping up to be a challenging one for the IRS due to staffing and funding challenges.

But now, some wonder whether a looming government shutdown at the end of January could disrupt operations just as the season kicks off.

Last week, congressional leaders released a "minibus" spending package designed to avert a government shutdown on January 30.

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The initially proposed bipartisan deal includes about $1.1 billion in reductions to the IRS’s base budget compared with FY 2025. Perhaps more significantly, it would claw back an additional $11.6 billion in supplemental funding originally intended for long‑term modernization at the tax agency.

But since then, as Kiplinger has reported, following the January 23 shooting of Alex Pretti by federal agents in Minneapolis, Senate Democrats have pledged to block the package because it includes funding for the Department of Homeland Security.

IRS funding is tied to this same legislative bundle, so the agency faces a risk of a funding lapse if lawmakers can't come to an agreement.

Meanwhile, the IRS, which reportedly lost nearly a quarter of its staff since the start of President Donald Trump's second term, has said that it expects to receive approximately 164 million individual income tax returns this filing season.

Last year, the agency received roughly 140.6 million individual returns.

So, it's fair to say that the IRS will have much to do this year, with fewer resources. And if a partial government shutdown occurs instead of this deal passing, the IRS could be forced to operate under even tighter emergency contingencies.

What does all of this mean for you and your taxes?

New proposed IRS budget cuts

The most recent proposed government funding agreement (now seemingly in limbo) signals a move toward a leaner IRS on top of already existing staffing shifts, cuts, and funding clawbacks.

Here is how the proposed budget for the current fiscal year (FY26) compares to last year:

IRS Budget Comparison FY25 vs FY 26

Swipe to scroll horizontally

IRS Budget Category	FY 2025 Enacted	FY 2026 Bipartisan Deal	The Likely Shift
Taxpayer Services	$2.8 Billion	$3.0 Billion	Slight increase for phone support
Enforcement	$5.4 Billion	$5.0 Billion	Funding would be reduced by about $400 million, which could limit some compliance and enforcement activities
Tech & Operations	$4.1 Billion	$3.2 Billion	Funding would be about $900 million lower, potentially slowing some technology and operations upgrades
Modernization Clawback	—	$11.6 Billion	Removed; rescinded from long-term pool
Total Base Budget	$12.3 Billion	$11.2 Billion	9% overall reduction

These proposed budget cuts follow a volatile year of internal restructuring.

About a year ago, in 2025, the Department of Governmental Efficiency (DOGE), then led by Elon Musk of Tesla, X (formerly Twitter), and SpaceX fame, began cutting IRS personnel, culminating in a 25% reduction in the tax agency's workforce.

Later, on July 4, 2025, President Donald Trump signed the so-called "big, beautiful bill" into law, which made sweeping changes to many tax provisions, including those that significantly impact individual filers.

IRS staff cuts could mean a long wait for help

For example, you might spend a long time on hold this tax season while waiting to speak with an IRS taxpayer assistance agent.

Following the IRS staffing cuts last year, a report from the Treasury Inspector General for Tax Administration (TIGTA) noted significant declines in staffing in taxpayer assistance functions and warned of potential impacts on service.

The IRS reported having 20,692 taxpayer assistance employees.
The IRS previously reported that more than 20,000 employees worked on taxpayer assistance, but TIGTA found that staffing has fallen since then, leaving fewer staff available for the 2026 filing season.
TIGTA stated the IRS needs 3,500 additional personnel to reach an adequate staffing level.

The IRS is under a hiring freeze, so it can’t recruit new full-time permanent employees. It used its "direct-hire authority" to recruit temporary employees, but whether it hired enough people went largely unreported.

Additionally, according to Accounting Today, the IRS has closed 9 walk-in centers nationwide, including locations in California, Pennsylvania, and New York.

At the end of 2025, several Democratic senators called for an end to the hiring freeze. In a letter to Treasury Secretary/Acting IRS Commissioner Scott Bessent, Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.) Cory Booker (D-N.J.), Raphael Warnock (D-Ga.), and others expressed concern about the impact of personnel cuts on IRS services.

While acknowledging " some isolated instances of hiring for internal positions", the senators wrote: "We are concerned that the recent personnel cuts…and the ongoing hiring freeze will greatly hinder these advocates' ability to provide quality, timely service to taxpayers who need help."

A bumpy ride with a new Schedule 1-A?

While it's unlikely that the 2026 filing season will be "smooth sailing," the IRS released guidance last fall on new deductions for tips, overtime pay, and car loan interest — all changes in the 2025 Trump tax bill. These new deductions will be claimed by eligible taxpayers on the brand-new Schedule 1-A (Form 1040).

In a January 8 news release, IRS CEO Frank Bisignano, who simultaneously leads the Social Security Administration (SSA), expressed confidence:

"The Internal Revenue Service is ready to help taxpayers meet their tax filing and payment obligations during the 2026 filing season. As always, the IRS workforce remains vigilant and dedicated to their mission to serve the American taxpaying public. At the same time, IRS information systems have been updated to incorporate the new tax laws and are ready to efficiently and effectively process taxpayer returns."'

Getting information about your return

One way to navigate the communications dilemma posed by IRS staffing cuts is to create an online IRS account. To do that, go to IRS.gov and follow the instructions. You’ll get access to your tax transcripts, account status, and digital notices.

However, the account’s functionality is limited. You can’t ask questions or get tax advice. So consult with a trusted tax professional if you have questions or concerns about your 2025 tax return.

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Roxanne Bland, a self-styled “tax nerd,” has worked in the tax field for over 30 years as a state tax legal analyst. Before joining Kiplinger as a tax writer to help ordinary people make sense of their federal and state tax obligations, Roxanne spent many years covering developments in state tax jurisprudence at the U.S. Supreme Court and worked closely with state revenue agencies to develop uniform tax legislation. She has also contributed to Tax Notes State, a Tax Analysts publication focusing on cutting-edge corporate tax issues.