How IRS Layoffs Could Affect Your Tax Return

You may have recently seen headlines that the IRS plans to cut up to 25% of the agency’s 100,000 employees. With a potential layoff of 25,000 IRS employees looming overhead, it’s reasonable to assume that such a significant reduction in staffing will likely affect this year’s tax season.

As a US expat filing abroad, you may be wondering how these layoffs could impact the timeline of your tax return and refund. Should you file now, or wait? Let’s take a look at how a reduced IRS workforce could lead to longer processing times. Additionally, you may experience customer service delays. You will also learn what you can do to stay proactive about your tax return for the 2025 tax season and beyond.

Why is the IRS Cutting Staff in 2025?

Mass layoffs at the IRS are part of the US federal government’s ongoing initiative to downsize federal agencies across the board. Namely, the staffing cuts are a direct result of the Inflation Reduction Act of 2022 rollback. This rollback allocated $80 billion to the IRS over the next 10 years. Now that Congress has partially rescinded these funds, the IRS has had to scale back its operations. This included letting go of a large number of staff.

Key Areas Affected by IRS Staffing Cuts

While we don’t yet have exact figures on which departments faced the biggest staff cuts, reduced IRS staffing will have the biggest impact on taxpayers this year in several key areas.

1. Tax Return Processing Delays

With fewer IRS employees reviewing tax returns, processing delays are inevitable. This is especially true when it comes to paper returns. Filing electronically is always a faster, safer, and more efficient way of submitting your paperwork to the IRS. However, there are simply some returns that must be paper mailed. For example, Streamline Procedure for expats must be mailed. The wait times for processing these returns may even increase compared to previous years.

2. Customer Service and Support

Since customer service and support lines are expected to be understaffed this year, call wait times could become quite long, especially during and immediately after peak filing season. The same is true for written correspondence. Therefore, expect longer-than-usual wait times when receiving responses from IRS representatives.

3. Auditing

The IRS cut around seven percent of its workforce in February, including at least 5,000 employees in enforcement and collections. With more layoffs expected, it’s safe to assume any pending and future audits will see taxpayers waiting longer for resolutions.

4. Backlog of Previous Tax Years

Likewise, the IRS’s existing backlog of unprocessed returns and correspondence with taxpayers from prior years will contribute to further delays going forward. If you were waiting on a past-year refund or to correct your tax return, be prepared for what could be an extended delay in processing.

What Taxpayers Can Do to Prepare

With the IRS already facing staff shortages and more budget cuts and layoffs planned for the near future, it’s anyone’s guess how exactly these changes will impact US taxpayers — or for how long. However, there are a few small steps you can take now to ensure you’re in the best shape possible for tax season. These steps will also help you avoid potential complications down the road:

• File early and electronically: Avoid delays and the uncertainties of physical mail by e-filing your return.
• Choose direct deposit: This is the quickest and most reliable way to receive your tax refund.
• Double-check your return: Ensure your tax return and all associated paperwork are properly filled out to avoid filing errors and extra scrutiny.
• Keep copies of all documents: Make sure to have digital backups of all your W-2s, 1099s, FBARs, receipts, and expat paperwork.
• Get professional help with MyExpatTaxes: File with peace of mind using MyExpatTaxes. Our easy-to-use tax software automatically searches for any applicable expat tax credits and applies them to your tax return. We e-file on your behalf and send notifications as your return is processed by the IRS.

Long-Term Outlook

It’s a safe bet the widespread IRS layoffs will make this tax season a little more chaotic than usual. That said, you’re still responsible for meeting crucial tax deadlines and paying any balances owed to the IRS. While expats receive automatic extensions on filing their tax returns till October 15th, it’s never a bad idea to file as soon as possible. This is particularly true when it comes to the potentially complicated nature of an expat return.

Get started now by signing up for a free MyExpatTaxes account. Fill out your information, confirm the results and calculations, and pay only when you’re ready to e-file. If you need additional help, we offer live human customer support. You can also work with one of our qualified Tax Professionals when you upgrade to our Premium plan.