IRS Faces Mounting Challenges as Tax Season Begins

As the 2026 tax filing season gets underway, the Internal Revenue Service is grappling with significant challenges stemming from budget cuts, staffing shortages, and political pressures. These issues raise concerns about the agency’s ability to effectively collect taxes and serve taxpayers, potentially impacting the revenue stream for vital government programs.

Staffing Shortages and Operational Concerns

The IRS has experienced a substantial decline in staffing levels in recent years. By the end of 2024, the agency employed over 100,000 staff members. yet, by late 2025, that number had fallen to approximately 81,000 due to firings and buyouts [The Atlantic]. This nearly 20% reduction in personnel is expected to exacerbate existing problems, such as processing backlogs and outdated technology, and introduce new obstacles to efficient tax administration.

Experts note that the loss of experienced employees—those with significant institutional knowledge—is particularly concerning. Mark Mazur, a former tax policy developer for the Obama and Biden administrations, suggests this exodus could hinder operations, collections, and complex audits [The Atlantic].

Political Interference and Data Security

The current political climate has further complicated the IRS’s operations. A shift in policy during the previous tax season saw the IRS sharing data from protected tax records with the Department of Homeland Security, raising concerns among immigrant communities [The Atlantic]. The National Immigration Law Center has warned that this practice could discourage undocumented individuals from filing returns, potentially reducing overall tax revenue and fostering fear within these communities.

Trump’s Lawsuit and Agency Leadership

Adding to the IRS’s challenges, President Trump is currently pursuing a $10 billion lawsuit against the agency, alleging mishandling of his tax information [AP News], [CBS News], [The New York Times]. The lawsuit stems from the leak of his tax returns during his first term, with the former IRS contractor Charles Edward Littlejohn sentenced to five years in prison for the leak in 2024 [AP News], [CBS News], [The New York Times]. The agency has also been without a permanent commissioner since August, with Frank Bisignano of the Social Security Administration currently serving as the first-ever IRS CEO [The Atlantic].

The Tax Gap and the Importance of IRS Funding

The IRS faces an ongoing challenge in closing the “tax gap”—the difference between taxes owed and taxes collected. In 2021, the tax gap was estimated at around $600 billion, representing approximately 3% of America’s GDP [The Atlantic]. Research suggests that for every dollar spent on IRS audits of high-income earners, the agency recovers $12 [The Atlantic], highlighting the financial benefits of adequate IRS funding.

Modernization Efforts and Customer Service

Even as some areas of the IRS are undergoing modernization, including the implementation of artificial intelligence, much of the agency’s core infrastructure relies on decades-vintage technology, including the COBOL programming language [The Atlantic]. Customer service has also been impacted by staffing shortages, requiring employees from various divisions to handle phone inquiries, even without specialized training [The Atlantic].

Despite these challenges, experts do not anticipate an immediate collapse of the IRS. However, continued underinvestment and political interference threaten to undermine the agency’s ability to fulfill its essential role in a functioning society.