The next time you need a human being at the IRS — to release a held refund, fix a misapplied estimated payment, or untangle a notice you don't understand — expect to wait nearly twice as long to reach one, and flip a coin on whether anyone picks up at all. That is not a prediction. It is what the agency's own oversight bodies documented after the 2026 filing season, and the staffing behind those numbers has only shrunk further since.
This post is not about tax politics. It is about operating reality: what a smaller IRS means for your phones calls, your paper filings, your refunds, your audits, and — most importantly — the handful of habits that keep your business out of the backlog.
What Actually Happened, in Numbers
Independent watchdogs — the Treasury Inspector General for Tax Administration (TIGTA), the Government Accountability Office (GAO), and the Taxpayer Advocate Service (TAS) — have all published their scorecards. The picture is consistent:
- The workforce shrank by roughly 31,000 people (28%) during 2025, according to TIGTA. The Taxpayer Services division, which processes returns and answers phones, lost about 11,000 employees (26%). The IT division lost 29%.
- Enforcement and collection staffing fell 27%, with examination and collection headcount dropping from 27,217 at the end of fiscal 2024 to 19,612 at the end of fiscal 2025 — and lower still in early fiscal 2026. Roughly a third of revenue agents and tax examiners separated from the agency.
- Phone service deteriorated sharply. TAS data shows the average wait to reach a customer service representative rose from 8 minutes in the 2025 filing season to 14 minutes in 2026 — roughly a million extra taxpayer-hours on hold. The "Level of Service" (the share of routed calls actually answered) fell from 70% to 56%.
- Paper processing slowed. GAO reported average paper return processing time grew from 27 days in fiscal 2024 to 36 days in fiscal 2025, and paper returns awaiting processing quintupled heading into the 2026 season. Inventories needing manual handling rose 17% year over year.
- Audit revenue collapsed. Revenue from audits fell 35% in fiscal 2025, from $10 billion to $6.5 billion, per TIGTA. Audits of partnerships fell 76% between 2023 and 2025. The estimated tax gap — taxes owed but unpaid each year — sits near $696 billion.
The agency tried to plug the holes. It was authorized to hire about 5,400 processing and correspondence workers, but by January 1 had onboarded only two-thirds of the correspondence hires and just 3% of the return-processing hires. In February 2026 it received emergency authority to hire 8,000 more. It also involuntarily reassigned around 1,200 IT and HR employees to return processing — many with no relevant experience, and hundreds failed their initial certification exams.
The Taxpayer Advocate summed up the agency's dilemma in one sentence: the IRS "lacks the staffing levels and technology necessary to provide both high-quality telephone service and timely case processing simultaneously." It chose processing. Phone callers paid the price.
What It Means for Your Business
Translate those agency-level statistics into the moments they will actually cost you time and money:
1. Calling the IRS is now a last resort, not a first step
With barely half of routed calls answered and 14-minute average waits (worse at peak times), every issue you can resolve online saves you an afternoon. If your current workflow for IRS problems starts with "call the practitioner line on Monday," that workflow is broken. Rebuild it around self-service first (more on the tools below).
2. Paper is where returns go to wait
A 36-day average for paper processing — with quintupled backlogs — means every paper return, paper response, and paper payment you send enters the slowest queue in the building. Amended returns, entity classification elections, and mailed estimated payments all feel this. If you can file or respond electronically, do.
3. Refunds and resolutions take longer when a human must touch them
Straightforward e-filed returns with direct deposit mostly sailed through; the pain concentrates wherever manual review is required — identity verification holds, correspondence audits, injured-spouse claims, penalty abatement requests. A refund held pending verification now waits behind a 17%-larger pile of unprocessed correspondence. Build buffer time into any cash-flow plan that depends on a refund or credit.
4. The free-file landscape shifted
The agency discontinued Direct File, its in-house free filing program. If you or your employees used it, line up an alternative before next season rather than discovering the gap in April.
The Audit Paradox: Fewer Audits Does Not Mean Less Risk
Here is the trap some business owners are walking into: audit revenue is at multi-year lows, partnership audits fell 76%, and headlines muse that "the IRS isn't going to catch me." Treating a hollowed-out enforcement division as permission to get sloppy is a serious miscalculation, for four reasons:
Automated enforcement never left. Most small-business enforcement was never a revenue agent visiting your office — it is document matching. CP2000 underreporter notices, 1099-K mismatches, and payroll deposit discrepancies are generated by computers comparing the forms filed about you against the return you filed. Those systems run with or without auditors. Sloppy 1099 reconciliation will still generate a notice; you will just wait longer on hold to resolve it.
Penalties and interest are automatic. Late filing, late payment, and underpayment penalties accrue by statute, not by auditor discretion. A short-staffed IRS is not waiving them proactively — and getting a first-time abatement approved takes longer when correspondence sits unprocessed.
The statute of limitations favors the patient agency. The IRS generally has three years to audit a return — six if you underreport income by more than 25%. Staffing rebounds, hiring sprees, and automation drives can all arrive inside that window. A return you file this year can still be examined by a rebuilt agency in 2028 or 2029.
States piggyback. Many states receive federal audit results and matching data automatically and run their own enforcement. A quiet year federally does not mean a quiet year from your state revenue department.
The rational response to weaker enforcement is not weaker compliance — it is exactly the same compliance, executed in ways that don't require IRS humans to help you.
What to Do Differently: A Small-Business Playbook
Move everything you can into the Business Tax Account
The IRS has been steadily expanding its Business Tax Account (BTA), the online self-service portal for employers and entities. Access now covers sole proprietors, S and C corporations, partnerships, tax-exempts, and government entities. In 2026 the agency added digital copies of more notices (including refund and extension notices), online payment and transcript features, and the ability to respond to certain notices electronically.
Set up your BTA now, before you need it: verify your balance, confirm the business name and address the IRS has on file, and pull transcripts yourself instead of calling for them. Every task you complete there is a phone call you will never have to place.
E-file everything, including the things you used to mail
E-filed returns with direct deposit remain the fastest path through the agency. The same logic applies to information returns — the IRS offers an online portal for filing Forms 1099 electronically — and to responses: where the agency accepts an online response to a notice, use it rather than mailing a letter into the backlog.
Respond to notices immediately and completely
When correspondence inventories grow 17%, a partial response that triggers a second round-trip can cost you months. Open every IRS notice the day it arrives, respond by the deadline with everything requested in a single complete package, and keep proof of everything you sent. If a notice includes a QR code or online response option, use it — it lands in a tracked system, not a mail pile.
Pay electronically and on schedule
Electronic payments post faster and misapply less often than mailed checks, and estimated payments made on time avoid the underpayment penalties that a short-staffed agency will still assess automatically. If you owe and can't pay in full, set up an installment agreement online rather than waiting for collections to contact you — online agreements are available without a phone call for qualifying balances.
Document like you'll never get to explain in person
Because you might not. Keep contemporaneous mileage logs, receipt images, and contract files organized by tax year. If a notice arrives two years from now, your response will be assembled from records, not memory. Clean, reconciled books are what let you answer a CP2000 in an afternoon instead of a month.
Know your escalation path before you're stuck
If normal channels fail — your refund is held past published timeframes, or you're facing hardship from agency delay — the Taxpayer Advocate Service exists for exactly these cases, and the agency's own reports show hardship cases rising. Also make sure your tax professional has a valid authorization on file (Form 2848 or the online Tax Pro Account) so they can act for you without a paperwork delay when minutes matter.
Plan extensions and elections early
Anything requiring IRS processing on a deadline — extensions, S elections, entity classification, EIN applications for new entities — should be filed as early as possible. Don't assume published turnaround times still hold, and don't discover a rejected electronic filing on the due date.
Keep Your Books Audit-Ready, Even When Audits Are Rare
Every item in the playbook above gets easier — or harder — depending on the state of your books. In a year when reaching the IRS takes twice as long and every paper response sits in a mountain of correspondence, the businesses that suffer least are the ones whose records answer questions before they're asked: income tied out to every 1099, expenses categorized and receipted, payroll deposits reconciled monthly, and owner draws cleanly separated from business spend.
That is a bookkeeping discipline problem, not a tax-season problem. The habit that pays off is a monthly close — reconciling bank and card accounts, reviewing uncategorized transactions, and keeping supporting documents attached — so that a notice, a loan application, or an eventual audit never sends you reconstructing a year from statements.
Simplify Your Financial Management
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