IRS Faces Staff Cuts, Tech Hurdles in 2026 Tax Season; Refunds at Risk Without Direct Deposit

The IRS confronts a strained 2026 tax season amid a 27% workforce reduction, leadership turnover, and retroactive 2025 tax law changes under the “One Big Beautiful Bill,” according to National Taxpayer Advocate Erin Collins’ Jan. 28 report. While most refunds will process normally, filers without direct deposit face up to six-week delays as the IRS phases out paper checks. Vulnerable groups — unbanked, elderly, disabled — are disproportionately affected. The agency will send follow-up letters requesting banking details or consider exceptions for paper issuance. Student loan refund offsets are temporarily paused after a Jan. 16 Education Department delay, though duration remains unclear. Outsourced scanning of 11 million paper returns introduces fraud and processing risks. Amended returns took over five months on average in FY2025; identity theft cases averaged 21-month waits. Call center capacity dropped 22%, with low-rated voicebot performance.