Trump may hand out fatter tax refunds this year, but whether a short-staffed IRS can get it to you is a different matter, watchdog warns

A fiscal centerpiece of President Donald Trump’s agenda so far has been his pledge to lower taxes, and Americans are close to seeing healthy refunds from their 2026 filings. But actually seeing those returns show up on time might not be so straightforward, according to a recent federal watchdog report, largely due to another of Trump’s signature policy stances.

The Trump administration’s purge of the federal bureaucracy last year did not spare the Internal Revenue Service, the agency responsible for collecting taxes and processing returns. By last July, around 25,000 employees had left the agency through layoffs or deferred resignations, around 25% of the agency’s workforce. More were let go last fall during the government shutdown. The administration has framed trimming the agency’s headcount as a move towards modernity and higher efficiency. But at least in the short term, the skeleton crew manning the IRS might struggle to deliver on Trump’s windfall promises.

The IRS now employs around as many people as it did in 2021, and due to last year’s prolonged shutdown, the agency was unable to hire and train employees to assist during filing season, according to a Treasury Department watchdog report released last week. This, combined with a mounting backlog of unprocessed tax-related items from years prior, could add up to disappointment for filers expecting prompt returns.

The issues plaguing the agency “may affect the IRS’s ability to timely process tax returns during the filing season, especially with reduced staff,” according to the report. “This could result in delays in taxpayers receiving refunds.”

A disrupted tax refund season could undermine what Trump himself recently touted will be the “largest tax refund season of all time.” Tax provisions in the One Big Beautiful Bill Act passed last year included several tax breaks and income tax reductions. 

The changes may have reduced individual taxes by $129 billion, according to the Tax Foundation, a non-partisan think tank. Up to $100 billion of that could be headed towards refunds, adding up to a typical return up to $1,000 more than last year.

But because the IRS did not adjust withholdings before the law passed, most workers overpaid in taxes last year. That means many will be walking away with large returns this filing season, on paper at least. 

Spoiled tax season

That is, if the IRS can get those refunds out on time. The recent watchdog report painted a picture of an agency suffering from extreme understaffing and years of unprocessed claims since the pandemic. The report found that terminations had reduced headcount by 17% in key filing season roles. Additionally, the inventory of backlogged claims has more than doubled since 2019 to 2 million items this year, impacting the agency’s ability to process new claims on time.

The record, 43-day government shutdown last fall furloughed IRS employees who had been working through that list of unprocessed items, and also affected the agency’s hiring plans. Most years, the IRS relies heavily on seasonal workers during tax season. But by the end of 2025, the agency had fully onboarded 50 of the 2,200 employees it had planned to hire, or just 2%. With the IRS generally requiring 60 to 80 days to train new employees, and tax season starting last week, the agency will have its work cut out for it this year.

Over the past year, Treasury Secretary Scott Bessent has said that the IRS would rely more heavily on AI and automation software due to staffing shortages. The watchdog report noted that AI-powered products could be useful to IRS agents during future tax seasons, but rollout this year has been slow and riddled with bugs, primarily due to IT staffing cuts. 

All in all, it’s shaping up to be a difficult tax season for remaining IRS employees and people expecting returns on time. Delayed tax refunds can be a nuisance for some people, but lower-income households in particular tend to depend much more heavily on that check being timely. A return can be a lifeline for households making less than $30,000 annually, often representing the single largest payment they will receive in a year, and many use it to pay down debt or make large essential purchases. Prompt payments are even more important for people who qualify for subsidies such as the child tax or earned income credit. 

Americans are growing more reliant on those refunds every year, with one survey last year finding that roughly half of taxpayers said they were more dependent on their refund to make ends meet than they were in the past.

This story was originally featured on Fortune.com