IRS Staffing Cuts Are Slowing Refunds—Here’s What Taxpayers Need to Know

If you’re waiting on a tax refund—especially from an amended return—you may be in for a longer wait.

A recent government watchdog report shows that staffing shortages at the IRS have led to a backlog of nearly 590,000 amended tax returns, raising concerns about delayed refunds for hundreds of thousands of Americans.

What’s causing the backlog?

The IRS workforce has been reduced by about 27 percent, according to the latest figures. These cuts followed layoffs carried out by the Department of Government Efficiency (DOGE), which was overseen by Elon Musk during the early days of the Trump administration.

With fewer employees available to process returns and answer questions, the agency is struggling to keep up with the volume of work—especially paper filings and amended returns, which require manual review.

Who is most affected?

Taxpayers who file amended tax returns face the biggest risk of delays. Amended returns are typically filed when someone needs to correct mistakes related to income, deductions, dependents, tax credits, or refund amounts.

According to an analysis of the Treasury report, these returns are piling up faster than the IRS can process them.

To put the problem in perspective:

• The current backlog is about 20,000 higher than last year
• It’s roughly four times larger than it was in 2019, before the pandemic

Customer service is also taking a hit

The IRS is also answering fewer phone calls. The watchdog report found that the agency lowered its customer service goal from 85 percent of calls answered to just 70 percent—meaning roughly 3 out of every 10 calls may go unanswered.

For taxpayers trying to check on a delayed refund, that can add another layer of frustration.

Delays are costing the IRS billions

Ironically, slower processing doesn’t just hurt taxpayers—it also costs the government money.

By law, the IRS must pay interest on refunds issued more than 45 days after the filing deadline. In 2025 alone, those interest payments totaled more than $2.6 billion, according to the Treasury report.

The interest rate the IRS pays on late refunds is 7 percent for the first three months of 2026, meaning longer delays could drive that cost even higher.

The bottom line

With fewer workers and growing backlogs, the IRS is under pressure—and taxpayers may feel the effects through delayed refunds and reduced customer service.

If you’re filing an amended return this year, experts suggest:

• Filing as early as possible
• Keeping copies of all documents
• Using online IRS tools to track your return when available

While staffing challenges continue, patience may be required—but the financial and service impacts are already adding up for both taxpayers and the government.

The Internal Revenue Service (IRS) began accepting 2025 tax year returns on January 26, 2026. For most individual taxpayers, this means you can now start submitting your federal return electronically personally or with the help of a tax professional.

Here’s everything you need to know about IRS updates and how newly enacted tax provisions might affect you:

Free File & Filing Options 

Those with adjusted gross income of $89,000 or less are eligible to use the IRS Free File program to prepare and file a federal return online at no cost. Unlike some past years, the IRS Direct File tool is not available for 2026. Taxpayers who want a free option will need to rely on Free File, IRS Free Fillable Forms, or volunteer programs like VITA and TCE.

Major Tax Law Changes

This tax season reflects major updates from the One Big Beautiful Bill Act and other recent legislation. These changes affect deductions, credits, reporting rules, and more — and getting them right can mean a bigger refund or a smaller tax bill. Here are a few highlights:

• Bigger SALT Deduction Cap: The state and local tax deduction cap has increased from $10,000 to $40,000 for 2025 returns. 
• Child Tax Credit Updates: The maximum Child Tax Credit went up for 2025 returns and has slightly different income phase-outs. 
• Senior Bonus Deduction: Taxpayers 65 and older can claim up to an extra $6,000 deduction through 2028 (subject to income limits). 
• 1099-K Reporting Rule Reversion: Platforms issue Forms 1099-K only under the higher $20,000/200-transaction threshold. 

These changes can impact everything from filing strategy to what forms you complete — and may require filing new schedules introduced for this season.

IRS Tools & Preparation Tips

To make the process smoother and help avoid delays:

• Open or log into your IRS Online Account: You can view your tax records, payment history, and important notices anytime. 
• Use direct deposit for refunds: The IRS has begun phasing out paper refund checks and strongly encourages direct deposit for faster, more secure refunds. 
• Gather forms early: W-2s, 1099s, digital asset transaction records, and other paperwork are key to accurate filing. 
• Be aware of scams: The IRS will never initiate unscheduled calls or texts; if in doubt, go to IRS.gov directly. 

What This Means for Taxpayers

The 2026 filing season is shaped by substantial tax law changes that affect millions of Americans. Whether you’re a first-time filer, a seasoned taxpayer, or preparing returns for a family, understanding the landscape will save you time and potentially maximize your refund.

There’s also growing conversation among tax professionals about IRS staffing levels and system readiness, so patience and organization are essential this season.

Final Takeaway

Filing season 2026 is here — earlier and more complex than many recent years. With changes to deductions, credits, and filing tools, preparation is the key to success. Use the IRS free resources, get your documents organized, and don’t wait until April to start — thousands of refunds are processed in just weeks, and early filing can help you get yours sooner.

Get Ready for the 2026 Tax Season!

The One Big Beautiful Bill can affect federal taxes, credits, and deductions. Taking proactive steps like organizing documents and information is crucial to avoid last-minute stress and potential mistakes come tax filing time in April.

Here are a some tips on how to get prepared:

1. Check Your Withholding

If you’re unsure about how much tax is being withheld from your paycheck, it’s a good idea to review your withholding now. The IRS provides a handy tool called the Tax Withholding Estimator to help you determine if you’re having the right amount deducted. Adjusting your withholding early can help avoid any surprises at tax time.

2. Keep Documents Organized

Start gathering important tax documents now, including things like W-2s from employers, 1099s from banks, and receipts for deductions or digital asset transactions. Keeping them organized will save you lots of time and reduce the stress of tracking them down later.

3. Review Changes in Tax Law

Each tax year can bring new laws or changes to existing ones. The IRS suggests reviewing any updates that might impact your filing, including new credits or deductions you may be eligible for. Being aware of tax changes can potentially save you money and reduce your tax burden.

4. Contribute to Retirement Accounts

Contributions to retirement plans like IRAs or 401(k)s can lower your taxable income. Consider contributing now, especially if you have a bit more flexibility financially. It can pay off when tax season rolls around!

5. Avoid Scams

The IRS also reminds taxpayers to be cautious of phishing attempts and tax-related scams. The IRS will contact you through official mail so be weary about unsolicited calls of texts! Always check for official IRS communication, and if something feels suspicious, report it directly to the IRS.

Conclusion

Preparing for the 2026 tax season might seem like something you can put off, but it’s best to start while there’s plenty of time. By reviewing your withholding, staying organized, and understanding potential tax law changes, you can make tax time easier and less stressful. The earlier you start, the more in control you’ll feel come tax season!

Washington Expands Sales Tax—Here’s What’s Changing Under Senate Bill (ESSB) 5814

On May 20, 2025, Washington State approved major tax legislation that significantly raises Business & Occupation (B&O) and sales taxes, introducing billions in additional tax burdens across the state. Beginning October 1, 2025, many businesses and services previously exempt from sales tax will now be included under Washington’s retail sales tax system. In response, the Department of Revenue (DOR) has begun notifying over 90,000 businesses to prepare for compliance and review the new requirements in detail.

Will This Affect My Business??

Under the new law, these businesses will fall under the definition of “retail sale” and be subject to retail sales tax including:

• Information technology services
• Custom website development services
• Investigation, security, and armored car services
• Temporary staffing services
• Advertising services
• Live presentations
• Sales of custom software and customization of prewritten software
• Modification of digital automated services (DAS) exclusions

What Business Owners Should Do

1. Check the DOR website – There’s a whole section on “services newly subject to retail sales tax” with guidance.
2. Read interim guidance – DOR has published detailed interim guidance (IGSs) for each type of service now taxed.
3. Update your contracts, invoices, and client communications – If your business sells these services, you may need to add sales tax to your billing.
4. Ask for help – If you’re not sure how the tax applies in your situation, you can request a letter ruling or reach out to DOR.
5. Stay informed – These are interim rules, and more permanent regulations are expected to follow.

Complexities & Complications

• Contracts signed before Oct. 1: If you locked in a contract before the law changed and paid before then, you may be exempt.
• Live presentations: Whether tax applies may depend on the attendee location.
• Temporary staffing: Taxability depends on how staffing is arranged (agency vs contractors).
• DAS exclusions : The law is tweaking what counts as a “digital automated service,” so some services that were excluded are no longer.
• Interim guidance: These are not yet final rules. DOR is taking feedback, and tax policy could shift after the 2026 legislative session.

Bigger Picture

• This change is part of a major revenue-raising package passed by the state.
• According to the Seattle Metro Chamber of Commerce, DOR is telling businesses to pay taxes now if you’re unsure, then possibly get reimbursement later if guidance changes.
• There’s some concern and pushback: not everyone’s thrilled, especially small businesses that may now bear a heavier tax burden. 

Bottom Line

• If you’re a business offering any of these newly taxed services, you need to act now: read the DOR guidance, potentially change your billing, and talk to your customers.
• If you’re a customer buying these services, don’t be surprised if your bill has a new “sales tax” line item starting October 1.
• Washington’s tax rules are shifting—and for a lot of service businesses, this isn’t a small change, it’s a big one.

For more information visit: 

dor.wa.gov

Seattle Metropolitan Chamber of Commerce

Washington State Hospital Association+1