1.4 Million Tax Refunds Stuck: The IRS Staffing Crisis

Last Updated: April 19, 2026

The IRS lost 27,636 employees in 2025. Its workforce dropped from 102,000 to approximately 74,000, the largest single-year cut in the agency's history. The FY2027 budget proposes cutting 4,875 more.

The consequences showed up this tax season. Paper return inventory jumped 462% in one year. Phone wait times on the main line increased 71%. At least 1.4 million taxpayers received CP53E notices telling them their paper refund checks were delayed. And the IRS CEO called it "the most successful filing season in IRS history."

Key Takeaways

• 1.4 million taxpayers received CP53E delay notices from the paper check phaseout
• IRS workforce fell 27% in one year (102,000 → 74,000 employees)
• Main phone line wait: 7.28 minutes (up 71% from 4.25 minutes prior year)
• Collections phone line wait: 18 minutes (up 300%)
• Paper return inventory: 462% increase (52,000 to 294,000 returns, Dec 2024 to Dec 2025)
• FY2027 budget proposes cutting 4,875 more positions and $1.4 billion in funding

The staffing picture

Metric	Before Cuts	After Cuts	Change
IRS employees	102,000	74,000	-27%
Paper return inventory (Dec)	52,000	294,000	+462%
1040 phone wait (avg)	4.25 min	7.28 min	+71%
ACS phone wait (avg)	4.85 min	18.01 min	+300%
Level of service (1040 line)	67.6%	62.2%	-5.4pp
Seasonal hiring target	3,500	~2,500 hired	1,000 short

Sources: National Taxpayer Advocate, TIGTA, Bloomberg Tax.

The IRS fell more than 1,000 people short of its 3,500-person seasonal hiring target. To make up the gap, 1,500 IT and HR workers were involuntarily reassigned to do tax processing work they had not been trained for.

Who's waiting and why

The 1.4 million affected taxpayers fall into a specific category. An executive order directed the transition from paper refund checks to electronic payments. Taxpayers without direct deposit on file received CP53E notices explaining that their paper checks were being held until they set up electronic deposit.

This is not a processing error. It is a policy change hitting people who file correctly but receive paper checks, a group that skews older, lower-income, and rural.

Beyond the CP53E group, other categories are experiencing delays:

• EITC and ACTC filers: Normal PATH Act holds through mid-February, but processing is slower after the hold lifts due to reduced staff
• Identity theft victims: Average wait was 7 weeks for electronic returns and 14 weeks for paper in the 2025 season. Expect similar or longer in 2026.
• Paper filers in general: 4 to 8 weeks processing vs 21 days for electronic

An independent test by Tax Notes in April 2026 found callers waiting an average of 28 minutes before reaching an IRS employee on the 1040 line. That is nearly four times the official 7.28-minute average, suggesting the government's own numbers understate the real experience.

The filing season the IRS called "historic"

IRS CEO Frank Bisignano characterized the 2026 filing season as "the most successful in IRS history." The data he cited: 57 million refunds issued, 80%+ in under 21 days, average refund $3,571.

Those numbers are real. For electronic filers with direct deposit set up, the system works. The problem is not the 80% who got through smoothly. The problem is the 20% who didn't, and whether a fully staffed IRS would have caught them faster.

The National Taxpayer Advocate, Erin Collins, told Congress a different story. Her January 2026 Annual Report warned that a 26% workforce cut could produce backlogs "exceeding Covid-19 pandemic levels." The pandemic-era backlog peaked at 35 million unprocessed returns in 2021. The current paper backlog (294,000) is far below that level, but it is growing, and the staff available to work through it is shrinking.

The money the IRS won't collect

Here is the part of the IRS staffing story that gets less attention: the IRS is one of the few federal agencies that generates more revenue than it costs to operate. Every enforcement agent collects more in unpaid taxes than their salary.

The Yale Budget Lab estimates that the 27% IRS workforce cut will reduce federal tax revenue by approximately $198 billion over a decade. If the cuts deepen to 28,000 total positions (as the FY2027 budget suggests), the loss could reach $598 billion.

That is not a projection from an advocacy group. It is a nonpartisan university budget lab modeling the relationship between enforcement staffing and tax compliance. Fewer auditors means fewer audits. Fewer audits means more unpaid taxes. The math is not complicated.

The IRA (Inflation Reduction Act) had allocated $80 billion over 10 years to rebuild IRS capacity. Congress has since rescinded approximately $54 billion of that funding. The remaining $26 billion is projected to run out by FY2028.

What's coming in FY2027

The FY2027 budget proposes:

• Net reduction of 4,875 positions (saving $777 million)
• $1.4 billion total funding cut
• Enforcement division: 17% headcount cut, 50% funding cut
• Operations support: 65% funding cut
• Taxpayer services: +5% headcount but 8% funding cut

The enforcement cuts are the most consequential. Cutting enforcement staff at the IRS is the fiscal equivalent of closing a profitable store because the payroll line is too high, while ignoring that the store generates 5x its costs in revenue.

If you're waiting for a refund

Check your status. Go to irs.gov/refunds and use "Where's My Refund." You need your Social Security number, filing status, and exact refund amount.

If you got a CP53E notice: Log into your IRS online account at irs.gov/account and add direct deposit information. Once processed, your refund will be deposited electronically. This is the fastest fix.

If you need to call: Avoid peak hours (10 a.m. to 1:30 p.m. ET). Try calling before 10 a.m. or after 2 p.m. The main line is 1-800-829-1040.

If it's been more than 21 days (electronic) or 6 weeks (paper): Contact the Taxpayer Advocate Service at 1-877-777-4778. TAS can intervene on your behalf when normal channels are not working.

If you work at the IRS

The FY2027 budget proposes 4,875 more position reductions. If your position is affected, federal severance follows a statutory formula: one week of pay per year of service, capped at 52 weeks. Use the Severance Pay Calculator to estimate your payout.

For pension planning, the FERS Retirement Calculator models your annuity under different separation dates.

Frequently Asked Questions

Why is my 2026 tax refund delayed?

Three factors: the IRS lost 27% of its workforce, paper return inventory jumped 462%, and a new executive order eliminated paper refund checks for many filers. If you received a CP53E notice, your refund is caught in the paper-to-electronic transition. Electronic filers with direct deposit are largely unaffected.

How long are IRS phone wait times in 2026?

Through February 2026, the main 1040 line averaged 7.28 minutes (up 71% from the prior year). The ACS collections line averaged 18 minutes (up 300%). Independent testing found some callers waiting 28 minutes.

Will the IRS cut more staff?

Yes. The FY2027 budget proposes eliminating 4,875 positions and cutting $1.4 billion in funding. Enforcement takes the hardest hit: 17% headcount reduction and 50% funding cut.

Is my refund safe if I filed electronically?

For most people, yes. 80% of refunds arrived in under 21 days. Delays are concentrated in paper returns and CP53E cases. EITC/ACTC filers may see normal PATH Act timing delays.

What can I do if my refund is delayed?

Check irs.gov/refunds first. If you got a CP53E notice, add direct deposit at irs.gov/account. For delays beyond 21 days (electronic) or 6 weeks (paper), call the Taxpayer Advocate Service at 1-877-777-4778.

Related Resources

• Severance Pay Calculator: For IRS employees facing position reductions
• FERS Retirement Calculator: Model your pension under different separation scenarios
• IRS Workforce Cuts: 4,000 More Positions: The FY2027 budget proposal
• Tax Planning for Federal Retirees: Retirement tax strategies
• TSP 1099-R Tax Guide 2026: How to report TSP withdrawals
• $165.6 Billion: The Real Cost of Federal Workforce Cuts: Economy-wide impact including IRS
• State of the Federal Workforce 2026: 50+ workforce statistics

Sources

• National Taxpayer Advocate: 2025 Annual Report to Congress
• CNBC: 1.4 million filers face refund delays from paper check phaseout
• Yale Budget Lab: A Weakened IRS Has Significant Consequences
• Federal News Network: IRS workforce reduction reporting
• IRS.gov: Filing Season Statistics
• Bloomberg Tax: IRS seasonal hiring shortfall
• Tax Notes: Independent phone wait time testing (April 2026)