On January 20, 2025, President Donald Trump signed an executive order creating a hiring freeze for all federal agencies, and the IRS was to fall under that freeze indefinitely. With the arrival of tax season, concern arises that may affect the smooth processing of tax returns and general taxpayer experience. With the filing season opening on January 27, understanding how this freeze may impact your tax return becomes very important.
The hiring freeze context
The executive order requires that a hiring freeze be placed on federal civilian employees until further notice, exempting military personnel and those positions associated with national security or public safety. Notably, the IRS is excluded from the expiration timeline of the hiring freeze, meaning its ability to hire new agents or temporary workers will be limited until the administration deems otherwise.
The move comes at a time when the IRS has been under turmoil, with staffing shortages and backlogs compounded by the COVID-19 pandemic. The agency had previously received significant funding under the Inflation Reduction Act (IRA) to add to its workforce and improve services. However, recent legislative action reduced available funds by $20 billion, further complicating its ability to operate.
Potential impact on tax returns
With tax season now underway, many taxpayers are worried about how this hiring freeze will impact their returns. The IRS normally hires thousands of temporary workers each year to deal with the increased workload that comes with tax season to ensure that returns are processed in a timely manner. With this freeze on, experts are warning of a number of potential problems:
- Longer processing times: The IRS has a history of processing refunds within 21 days or less for those who file electronically and choose direct deposit. However, without adequate staffing, processing times may be substantially longer, possibly delaying refunds.
- Increased wait times: Taxpayers may also face longer wait times when trying to get help through IRS hotlines. Previous tax seasons reported average wait times of just three minutes, but that could balloon to 28 minutes or more if the current staffing levels continue.
- Reduced audit capabilities: The IRS has been committed to focusing audits on high-income earners rather than working-class taxpayers. With fewer agents available due to the hiring freeze, there may actually be a reduction in overall audit activity, meaning some of the high-income individuals may go scot-free.
Responses from experts
Experts have been citing worries over the hiring freeze and what it brings to taxpayers. According to Michael Cohn, Editor-in-Chief of Accounting Today, it may serve to stop the IRS from getting appropriate personnel to manage its workload when people need them most during tax season. Max Stier, president of the Partnership for Public Service, notes that measures like these may exacerbate holes in staffing and scare off skilled professionals from entering federal service.
However, some even argue that the near-term effect will be tempered by hiring previously done in advance. Melanie Lauridsen from the American Institute of CPAs mentioned, “A lot of seasonal staff may have already been hired and trained before this executive order was issued.” While the hiring freeze is a concern, she said it likely will not have an extremely material impact on preparing tax returns this year.
The broader impact of reduced staffing
The IRS hiring freeze is a problem not only for this tax season but involves long-term challenges for both taxpayers and the agency itself. Among them:
- Employee attrition: The instability about job security and workload may compel more senior employees to opt for retirement or move on, depriving the institution of the needed knowledge. Institutional knowledge depletion only worsens over time and makes the staff shortfall even greater.
- Increased burden on remaining staff: Current IRS employees will have to bear a heavier workload, as they try to cope with the existing backlogs along with the new filings. This may lead to burnout and reduced morale among the staff.
- Impact on taxpayer services: A less responsive IRS can frustrate taxpayers who depend on prompt help and reliable information about their returns. This may result in increased dissatisfaction with
Taxpayers should be prepared to wait longer for refunds and potentially longer when calling for help from IRS representatives. It is critical to stay on top of any changes within the agency as people work through this year’s tax filing season with continuing uncertainty over federal employment policies.
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