The IRS cut a fifth of its workforce. The bill came due in interest.
Summary
The IRS shed roughly 19,000 employees — about a fifth of its workforce — between October 2024 and October 2025. Return backlogs swelled to 129% above pre-pandemic levels, and the agency paid taxpayers more than $2.6 billion in interest for refunds it couldn't process on time.
The staff that isn't there
The cut shows up cleanly in the 's own personnel counts. Agency-wide headcount grew for three straight years under Inflation Reduction Act funding, peaking at 100,435 employees in October 2024. A year later it was 81,456 — a loss of 18,979 people, or 19%, in twelve months. That erased the entire IRA-era hiring gain and then some: October 2025 staffing is now below October 2021, per the Treasury Inspector General for Tax Administration's January 2026 filing-season readiness memo.
View data as table
| October 2021 | 81,492 | pre-Inflation Reduction Act baseline |
|---|---|---|
| October 2024 | 100,435 | IRA-funded hiring peak |
| October 2025 | 81,456 | −18,979 (−19%) vs. Oct. 2024 |
The National Taxpayer Advocate's 2025 Annual Report to Congress puts the same collapse on a different clock and gets an even sharper number: more than 102,000 employees in January 2025, down to about 74,000 by December — a 27% reduction in eleven months. The two counts use different snapshot dates and different internal data sources, so they won't match to the person, but they describe the same event: the entered the 2026 filing season with roughly a fifth to a quarter fewer people than it had a year earlier. In the Submission Processing unit — the office that actually opens envelopes and keys in paper returns — the shortfall isn't just people who left, it's people who were never hired back: as of December 30, 2025, Submission Processing had onboarded just 50 of the 2,200 new employees it was approved to hire for the 2026 filing season, 2% of the total, per .
The backlog that grew instead
Fewer people processing returns means returns pile up. tracks a composite inventory — amended returns, taxpayer correspondence, error resolution cases, unprocessed paper returns, rejected filings, and "unpostable" returns that can't be matched to an account — across the same three points in time.
View data as table
| Dec. 2019 | 871,393 | pre-pandemic baseline |
|---|---|---|
| Dec. 2024 | 1,510,290 | pre-staffing losses |
| Dec. 2025 | 1,997,533 | +129% vs. Dec. 2019 |
Inventory more than doubled from the pre-pandemic baseline to the eve of the 2026 filing season — and most of that growth happened in a single year, after staffing losses accelerated in 2025. Two categories inside that total are worth naming. The processed 3.7 million individual amended returns in fiscal year 2025 and took an average of five months to do it; it processed 1.6 million business amended returns and took an average of over 13 months, according to the National Taxpayer Advocate. Identity-theft victims fared worse still: the ended fiscal 2025 with about 316,000 self-reported identity-theft cases still open in its Identity Theft Victim Assistance unit, taking an average of 21 months to close one — a wait the Taxpayer Advocate has now called "unconscionable" for three years running.
Moving the target
Facing a hiring shortfall it couldn't close in time, Accounts Management didn't just fall short of its phone-service goal for the 2026 filing season — it lowered the goal. The target for the share of calls a live assistor answers dropped from 85%, the standard set for the 2025 filing season, to 70%. The last operated at 70% or below during the 2022 filing season, when service bottomed out at 18% amid a pandemic-era call surge — the exact era the agency has spent three years telling Congress it had put behind it. Separately, all 362 of the 's in-person Taxpayer Assistance Centers closed during the October–November 2025 government shutdown; by December, 35 of them had not reopened, per .
The takeaway
- The staffing cut was the policy, not a side effect. The didn't lose a fifth of its workforce to attrition it couldn't control — it lost it to a federal workforce-reduction drive, and by 's own account couldn't hire filing-season replacements fast enough: 2% of approved Submission Processing hires were onboarded by the season's start.
- The $2.6 billion is the cost of the delay, not the cause of it. Interest on late refunds is a statutory penalty the pays itself for missing its own processing deadlines — a cost created entirely by the backlog above, not by anything a taxpayer did.
- When the metric couldn't be hit, the metric was changed. Rather than staff up to the 85% phone-service standard it set a year earlier, the cut the target to 70% — the same level it last posted during the worst call-volume crisis of the pandemic era.
Figures come from two federal watchdog reports — 's January 2026 filing-season readiness memo and the National Taxpayer Advocate's 2025 Annual Report to Congress, delivered the same month — and describe overlapping fiscal-year and calendar snapshots rather than one reconciled ledger; each number's exact as-of date is noted where it's used.
Sources
- Treasury Inspector General for Tax Administration, The Internal Revenue Service's Readiness for the 2026 Filing Season (Audit No. 2026400002, January 26, 2026) — the $2.6 billion interest figure, agency-wide workforce counts for October 2021/2024/2025, the individual tax-return inventory table, Submission Processing and Accounts Management hiring shortfalls, the phone-service goal reduction from 85% to 70%, and Taxpayer Assistance Center closures. oversight.gov
- National Taxpayer Advocate, 2025 Annual Report to Congress (delivered January 2026) — the January-to-December 2025 workforce comparison (102,000 to 74,000 employees, a 27% reduction), amended-return processing times and volumes, and identity-theft case-resolution figures. taxpayeradvocate.irs.gov
- U.S. Government Accountability Office, 2025 Tax Filing: Management of Agency Reforms and Workforce Planning Needed to Address Severe Risks to Future Operations (-26-108116) — corroborating figures on correspondence-backlog growth and paper-return inventory increases. gao.gov
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By law, when the sits on a refund past 45 days, it owes the taxpayer interest — the same interest rate it charges taxpayers who pay late. That rule is normally a rounding error. In 2025 it became a line item, because the agency that owes the interest also spent the year cutting the staff who process the returns.