Despite calling this past tax filing season one of the most successful in recent memory, National Taxpayer Advocate Erin Collins warned there are potential risks heading into the 2026 tax season and stressed that “it is critical that the IRS begin to take steps now to prepare.”
“Looking forward, taxpayers may face more challenges,” Collins wrote in her Fiscal Year 2026 Objectives Report to Congress, which was released on Wednesday. “At this writing in early June, Congress is expected to extend key provisions of the Tax Cuts and Jobs Act and make additional changes in the law. Most changes won’t take effect until January 1, 2026, but several provisions impacting tens of millions of taxpayers will likely be effective during 2025. This suggests additional complexity when taxpayers file their 2025 tax returns during the 2026 filing season and more complexity the following year. In addition, the reduction of more than 25 percent in the IRS workforce has the potential to reduce taxpayer services.”
The Republican-led House of Representatives last month passed a sweeping budget bill that contains President Donald Trump’s legislative agenda for his second term, including tax law reforms. The legislation is currently in the Senate and will likely go through some changes before it’s ultimately approved by both chambers. Trump said he wants the legislation on his desk to sign by July 4.
- Related article: A Look at Key Provisions in the Proposed GOP Tax Bill
- Related article: Trump Tax Plan: What to Expect From the ‘Big, Beautiful’ Bill
- Related article: House Passes Sweeping ‘Big, Beautiful Bill’ After Weeks of Arm-Twisting
“The IRS’s ability to implement new tax laws quickly and accurately will … be a determining factor in the success of the filing season,” Collins wrote. “Most observers only see the finished product of a filing season. Most use a tax return preparer or a tax software package to prepare their returns, so they don’t realize the amount of work required to implement tax law changes. The task is huge and includes rapidly updating tax forms and instructions; reprogramming core processing systems; providing timely and clear public guidance; training frontline staff to handle taxpayer inquiries; and educating taxpayers and tax professionals regarding the changes Congress enacted and how to report information accurately to reduce the chance that their returns will be subject to math error adjustments, audits, or penalties and interest due to inadvertent errors.
“These tasks require a robust and flexible IT infrastructure capable of adapting to late-breaking legislative changes and managing high volumes of return data and correspondence.” she added. “The IRS must match technology upgrades with planning, testing, and staffing capacity. Investments in IT modernization cannot substitute for the foundational elements of personnel readiness, sound implementation strategy, and timely taxpayer communication.”
The Trump administration’s plan to reduce the size of the federal government’s workforce has impacted the nation’s tax collection agency, as the IRS has seen its workforce shrink—both voluntarily and involuntarily—since the president took office in January. There is also a hiring freeze in effect at many federal agencies, including the IRS.
- Related article: IRS Has Slashed 11% of Its Workforce as of March, TIGTA Says
Part of the reason the 2025 filing season was so successful, Collins said, was because the IRS did extensive advance work prior to the start of tax season—early hiring, training, and IT modifications. She noted that the IRS workforce was the largest it had been in years—more than 100,000 employees—so there were Submission Processing employees available to process paper-filed tax returns and customer service representatives available to answer telephone calls and process correspondence.
Collins wrote that the magnitude of these recent workforce reductions and the lack of hiring at the IRS will present significant challenges in the months leading up to the 2026 tax season.
“Typically, the IRS initiates hiring seasonal and essential employees and training customer service employees well in advance of the filing season, while simultaneously updating forms, publications, and processing systems in coordination with industry partners. These early milestones are critical to ensuring readiness. As of mid-2025, there are concerns the IRS has not yet performed key preparatory activities, including preparatory activities to hire and train seasonal and permanent filing season employees, thereby raising risks to the integrity and timeliness of the 2026 filing season,” she wrote. “Trained and knowledgeable personnel remain central to this effort. Staffing reductions and the loss of experienced personnel, particularly in mission-critical areas, create vulnerabilities in service delivery, return processing, and taxpayer assistance. To deliver a successful filing season, the IRS must complete the hiring of allocated customer service personnel and train them before the filing season begins.”
In her report, Collins recommended that the Trump administration lift its current hiring freeze and provide the IRS with direct-hire authority so Taxpayer Services can hire essential filing season employees, such as customer service representatives and Submission Processing staff, to meet taxpayer needs next year.
“And if that happens, it is critical the IRS hire them by the end of summer so it can onboard them, provide them with adequate training, and ensure they are prepared to assist taxpayers when the 2026 filing season begins in January. Especially in the short term, the number of total IRS employees is less important than the number of trained IRS employees,” she wrote.
Collins added, “As the IRS deals with the loss of knowledgeable and experienced personnel, changes to its IT systems, and the anticipated passage of tax legislation, IRS leadership must prepare to juggle its resources to overcome any anticipated challenges that could negatively impact the filing season. The IRS cannot afford another filing season characterized by refund delays, unprocessed returns, or unresponsive service channels. With thoughtful planning, targeted investment, and early execution, the IRS can meet its dual obligations of collecting the nation’s revenue and serving the public with integrity while protecting taxpayer rights.”
Other highlights of Collins’ report to Congress include:
2025 filing season ran pretty smoothly
The IRS received nearly 141 million individual income tax returns and processed about 138 million. Over 95% of processed returns were filed electronically, and about 62% resulted in refunds.
“Amid operational uncertainty, telework transitions, and the specter of workforce reductions, IRS employees have continued to uphold the agency’s mission with resilience and dedication and to diligently perform their jobs,” Collins wrote. “In fact, they worked through these challenges to deliver one of the more successful filing seasons in recent memory. Their contributions—processing returns, issuing refunds, developing guidance, answering tens of millions of taxpayer calls, and assisting with over 10 million pieces of correspondence—have helped millions of taxpayers navigate their filing and payment obligations.”
The IRS processed most returns without issues. However, the IRS “suspended” more than 13 million returns during processing pending additional review, and these processing delays generally translated into refund delays for the affected taxpayers.
Refund delays for identity theft victims still a serious concern
One longstanding filing season challenge that remains unresolved is lengthy delays in resolving identity theft cases. There are two categories of identity theft cases. One involves returns that IRS return processing filters flag as potential identity theft; the IRS flagged about 2.1 million such returns. In these cases, the IRS sent a letter to taxpayers notifying them they had to authenticate their identities before receiving their refunds. The IRS typically takes several months to resolve these cases.
In the second category of identity theft cases, a thief has stolen a taxpayer’s identity and filed a tax return using the taxpayer’s name and Social Security number. These taxpayers are victims and may also be experiencing the effects of identity theft beyond the context of their tax returns. Their cases are referred to the IRS’s Identity Theft Victim Assistance (IDTVA) unit for resolution.
As of the end of the filing season, the IRS had about:
- 387,000 IDTVA cases in inventory, and
- The cases were taking an average of about 20 months to resolve.
“These delays disproportionately affect vulnerable populations dependent on their refunds to meet basic living expenses,” Collins wrote.
In FY 2023, 69% of affected taxpayers had adjusted gross incomes at or below 250% of the federal poverty level.
“IRS leadership has repeatedly assured Taxpayer Advocate Service that reducing cycle time for IDTVA cases is a top priority, yet the cycle time remains unacceptably long,” Collins wrote. “I continue to urge the agency to focus on dramatically shortening the time it takes to resolve IDTVA cases, so it does not force victims, particularly those dependent on their tax refunds, to wait nearly two years to receive their money.”
The report recommends that the IRS reduce the average case resolution time to four months.
- Related article: Taxpayer Advocate: IRS Has Improved Taxpayer Services, But Delays in ERC Claims and Identity Theft Assistance Still a Concern
IRS should prioritize three taxpayer-focused IT projects
The report applauds recent progress in IRS technology modernization but urges the agency to stay focused on taxpayer-facing improvements. Collins highlights the IRS’s longstanding challenges in managing antiquated technology systems and recent efforts to modernize its systems. In collaboration with the Treasury Department and the Department of Government Efficiency, the IRS established nine distinct modernization “verticals” (i.e., technology projects designed to meet specific needs). Among them are a unified application programming interface, digitalization of paper returns and correspondence, and improved system interoperability among the agency’s roughly 60 stand-alone case management systems.
“For several decades, the holy grail of tax administration has been developing and deploying technology systems that automate key IRS functions in a way that improves taxpayer service and compliance and reduces the need for a large workforce,” Collins wrote. “The IRS has made notable strides during the last couple of years, and the Treasury Department’s leadership has committed to continue accelerating the IRS’s IT progress.”
Citing the adage, “If everything is a priority, nothing is a priority,” the report recommends that the IRS “focus its efforts on a manageable number of projects that provide the greatest value to taxpayers, employees, and the tax system while ensuring that taxpayers are not harmed during the transition period.”
The report recommends that the IRS adopt a “digital first” approach to taxpayer service and prioritize three projects:
1. Creating fully functional online accounts: Collins said the IRS’s No. 1 priority should be to enhance online accounts so taxpayers and tax professionals can view all relevant information and conduct all transactions with the IRS through their accounts.
“The IRS should continue to prioritize providing online functionality that mirrors the robust functionality offered by banks and other financial institutions,” she wrote. “For at least two decades, most of us have been able to conduct almost all our financial activity using online accounts. At banks, that includes making deposits, paying bills, transferring funds between accounts, and even applying for mortgages and home equity lines of credit. At brokerages, it includes buying and selling stocks and securities. With our credit card companies, it includes paying bills, monitoring charges, disputing charges, and paying off balances.”
By contrast, the functionality of IRS online accounts is limited. Taxpayers generally can’t file tax returns, view most notices, or respond to notices through their online accounts. Until recently, they could not make payments. As a result, only about 10% of taxpayers have taken the time to establish online accounts.
“The IRS must do more,” Collins wrote. “I believe the IRS’s top technology priority should be to allow taxpayers to conduct all transactions with the IRS from the ‘one-stop shop’ of an online account, just as they can with other financial institutions.”
- Related article: W-2 and 1095-A Forms Added to IRS Individual Online Account Tool
- Related article: IRS Boasts New and Improved Online Tools and Digital Services For Taxpayers
2. Digitizing the processing of paper-filed tax returns, correspondence, and other documents: The IRS estimates it will receive about 43 million paper tax returns and 19 million paper information returns in 2025, as well as millions of responses to the roughly 170 million paper notices it sends to individual taxpayers each year.
IRS employees manually transcribe data from paper-filed tax returns, digit by digit, into IRS systems. The IRS has allowed taxpayers to upload their responses to IRS notices through a digital “Document Upload Tool,” but it doesn’t have a way to process responses using automation. As a result, it generally must print taxpayer responses and route them to IRS employees for processing as if they had been submitted on paper.
“True modernization would provide an IT solution from the time the paper arrives at the IRS through the backend processing of the return or correspondence.” Collins wrote.
3. Integrating about 60 case management systems: The report says the IRS currently stores taxpayer data on about 60 distinct case management systems that generally can’t communicate with each other. As a result, a taxpayer who calls the IRS to discuss an account issue may find the customer service representative who answers lacks access to the relevant account information or must open multiple case management systems on different screens and toggle among them to answer questions.
“[A] call to a CSR can take much longer than it should,” the report says. “The CSR may have to put the taxpayer on hold multiple times to launch different systems and ultimately may still not be able to access the system relevant to the taxpayer’s issue, requiring a transfer or a call to a different IRS function. This fragmentation contributes to poor customer service and taxpayer frustration.”
Under an initiative known as Taxpayer 360, the IRS addressed these limitations by creating an integrated case management system that consolidates all relevant information a CSR may need to help taxpayers in a single database.
“Given that the IRS handles approximately 100 million telephone calls each year, giving CSRs faster and more complete access to taxpayer data would go a long way toward improving the timeliness and effectiveness of telephone service,” wrote Collins, who recommended the IRS continue to prioritize this initiative.
Other recommendations
In her report, Collins also made the following recommendations:
- Strengthen IRS oversight of unethical tax return preparers;
- Expedite the resolution of Centralized Authorization File number suspensions to protect tax professionals and taxpayers;
- Complete processing of all Employee Retention Credit claims and ensure taxpayer rights are protected;
- Improve responses to Freedom of Information Act requests;
- Strengthen Appeals’ independence and operational efficiency; and
- Improve the IRS’s criminal voluntary disclosure practice.
“I encourage Congress to provide the support and oversight the IRS needs to automate key taxpayer services, particularly the development of robust online accounts taxpayers can use to conduct all business with the IRS, the digitization of all paper, and the implementation of an enterprise case management system that will enable IRS employees to access all taxpayer information in one place,” Collins wrote.
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