IRS Tax Return: Will IRS layoffs delay refund, affect revenue collection?

Tax filing season in the United States is underway, but concerns are growing that tax refunds may be delayed due to anticipated staffing cuts at the Internal Revenue Service (IRS). President Donald Trump has signaled his intent to implement significant cuts to the agency, a move that Democratic Senators argue could negatively impact taxpayers.

"Staffing reductions at the IRS resulting from Trump's hiring freeze and potential layoffs would likely delay tax refunds, harm taxpayer service, and undermine law enforcement efforts," Democratic Senators warned in a letter to the Trump administration on Tuesday (February 18). They stressed the importance of keeping the IRS fully staffed to ensure smooth operations during tax season.

Experts advise filing early

Tax experts believe these concerns are valid, emphasising the importance of filing early to avoid potential refund delays. The IRS began accepting tax returns on January 27 and will continue processing them until the April 15 deadline.

"Your refund can be very fast indeed if you receive it by direct deposit, but those promises were made a few weeks ago before the agency knew of the cuts, so it's very hard to say what the impact will be," said Vanessa Williams, a senior fellow at the Urban-Brookings Tax Policy Center, in an interview with CBS.

Longer wait times for customer service

Taxpayers reaching out for assistance may experience longer hold times and slower customer service as a result of the cuts.

"I always advise people to do their taxes as early as they can, partly because hackers can get their Social Security numbers and file false tax returns," financial adviser Katie Brewer told CBS MoneyWatch. She added that the expected cuts could further strain IRS customer service, making it more difficult for taxpayers to get their questions answered.

Tax accountant Terrance Hutchins of Logos Financial Group echoed similar concerns, warning that wait times could increase, particularly for older filers who rely on phone support.

Older taxpayers who aren't as tech-savvy may find it harder to get help if phone lines are jammed, Brewer noted.

Electronic filing still recommended

Despite the looming IRS cuts, tax professionals still recommend electronic filing as the best way to receive refunds in a timely manner. Hutchins noted that relatively straightforward returns filed early and electronically should still be processed on time. However, taxpayers should be prepared for potential slowdowns as the tax deadline approaches.

As tax season continues, experts advise filers to submit their returns as early as possible to avoid any unexpected delays.

IRS layoffs threaten revenue collection

The layoffs of roughly 7,000 IRS probationary workers beginning this week are expected to significantly impact the agency’s ability to pursue high-wealth tax dodgers, potentially undermining revenue collection efforts. Experts warn that this reduction in workforce could have long-term consequences for federal finances.

A Congressional Budget Office (CBO) report issued last year detailed how rescissions in IRS funding could affect revenue projections. Depending on the severity of the cuts, the impact could be significant:

• A $5 billion rescission would reduce revenues by $5.2 billion from 2024 to 2034 and increase the deficit by $0.2 billion.
• A $20 billion rescission would reduce revenues by $44 billion and increase the deficit by $24 billion.
• A $35 billion rescission would reduce revenues by $89 billion and increase the cumulative deficit by $54 billion.

(With AP inputs)