The IRS examined its wealthiest filers at roughly half the rate it had planned last year, even as about 3.6 million taxpayers waited beyond normal processing windows to receive their refunds. Those two failures share a common root: the agency lost experienced staff faster than it could replace them, and the operational strain hit both enforcement and taxpayer service at the same time. Federal watchdog reports released in 2025 and 2026 now document how deeply those workforce gaps shaped the agency’s ability to keep its own commitments.
Staffing gaps drove audit shortfalls and refund backlogs simultaneously
The Treasury Inspector General for Tax Administration found that while high-income individual examinations increased in fiscal year 2024, key terms and methodologies for measuring compliance with the 2022 Treasury directive remained unresolved. That directive instructed the IRS not to raise audit rates on filers earning below $400,000 while stepping up scrutiny of the highest earners. The agency boosted raw exam counts for top-income filers, but its published exam coverage rates for taxpayers with total positive income above $10 million still fell well short of internal targets, according to the IRS’s own compliance-presence statistics.
The shortfall was not simply a planning failure. A separate GAO report on the 2025 tax filing season, designated GAO-26-108116, tied the gap directly to workforce planning deficiencies. The GAO identified severe risks to future IRS operations stemming from the loss of experienced revenue agents and the agency’s inability to onboard and train replacements at scale. Revenue agents who handle complex high-income audits take years to develop, and the departures created a bottleneck that no short-term hiring surge could fix.
That same workforce squeeze rippled into refund processing. The National Taxpayer Advocate’s 2025 Annual Report to Congress found that about 3.6 million taxpayers received refunds beyond normal processing time that year. The NTA noted that taxpayer service was strong overall in 2025 but warned of mounting challenges for filers who encountered problems heading into 2026. For the millions of people who depend on timely refunds to cover rent, medical bills, or debt payments, weeks of additional waiting carried real financial consequences.
Watchdog findings trace both problems to the same operational strain
The NTA’s 2026 mid-year report to Congress sharpened the picture. That report documented refund delays of six weeks or more in certain situations, driven partly by constraints around electronic payment procedures that slowed processing even when returns contained no obvious errors. The Advocate linked those delays to the same staffing and training issues that hampered complex audits: as seasoned employees left, remaining staff were shuffled between units to plug gaps, leaving fewer people available to resolve problem returns or respond to taxpayer inquiries.
Internal workload data reinforced that connection. During peak filing weeks in spring 2026, the IRS reported elevated inventories of unprocessed returns and correspondence, even as it touted improved call-answer rates and online tools. According to the agency’s own filing-season statistics, overall refund volumes and average refund amounts remained broadly in line with prior years, suggesting that the core processing pipeline was functioning. But watchdogs emphasized that averages masked a growing subset of taxpayers whose returns were routed into manual review queues with too few experienced employees to clear them quickly.
Those operational strains also reverberated into the IRS’s enforcement posture. To honor the $400,000 audit pledge, the agency shifted resources toward complex, high-income cases that demand specialized expertise and extensive documentation review. With fewer veteran agents available, managers faced a trade-off between pursuing large, resource-intensive examinations and maintaining basic coverage across other compliance areas. TIGTA’s findings indicate that in practice, the IRS fell short of its own coverage goals for the very highest-income filers, even as it publicly highlighted increases in the number of examinations opened.
For taxpayers, the result was a system that appeared to be moving in two directions at once. Many filers experienced faster phone service, more digital options, and routine refunds that arrived on time or early. At the same time, those who encountered complications-such as identity verification issues, mismatched information returns, or questions about credits-faced longer waits, limited access to specialized assistance, and growing uncertainty about when their cases would be resolved. The NTA warned that this “two-track” experience risks undermining confidence in the fairness and reliability of tax administration.
Looking ahead, watchdogs argue that rebuilding the IRS workforce is the single most important factor in closing both the audit gap at the top and the refund backlog for ordinary filers. That will require not only hiring but also sustained investment in training, mentoring, and modernized systems that allow less-experienced staff to handle complex work more efficiently. Until those changes take hold, the same constrained pool of employees will continue to be stretched between competing priorities, and taxpayers at both ends of the income scale will feel the effects.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
