Why IRS upheaval has not slowed tax season

(CNN) — The Internal Revenue Service has been in a state of turmoil ever since members of the Department of Government Efficiency embedded in the agency during tax filing season — aka the IRS’ busiest time of the year.

But so far at least, the upheaval has not tripped up tax filing and refund issuance, tax professionals told CNN. But it has delayed other critical issues for taxpayers and may end up hurting US coffers.

In the past seven weeks key top executives have left the IRS, including Commissioner Danny Werfel and the acting commissioner who replaced him. Roughly 6,700 probationary employees were fired in February (although they may soon get their jobs back as a result of a federal judge’s preliminary injunction Thursday). Close to 5,000 more employees accepted the so-called deferred resignation offer from the Trump administration, and about 6,800 more employees may be laid off in May, according to a draft plan for a reduction in force.

On top of personnel turnover, agency alums had worried that tax filing season, which officially runs from January 27 through April 15, could be disrupted by DOGE’s efforts to get unprecedented access to IRS data systems.

But based on CNN’s discussions with certified public accountants and enrolled agents, it appears that the electronic filing process has been running well so far.

Tax professionals said they’ve been able to get through to the IRS with questions, submit clients’ returns electronically, and obtain those clients’ refunds in a timely manner.

To date, “It seems to be business as usual,” said Mark Koziel, CEO of the American Institute of Certified Public Accountants.

Illinois-based CPA Mark Gallegos agreed that in terms of the filing process “it’s been relatively smooth so far.”

And tax preparation firm H&R Block told CNN that “we continue to see the IRS process returns and issue refunds, and we expect that to continue going forward.”

Former IRS Commissioner Werfel told CNN he isn’t surprised to hear that.

“The IRS made critical investments with resources from the Inflation Reduction Act over the past two years to strengthen the agency’s technology and electronic tools — and to staff up in calling centers and walk-in centers to meet demand,” he said. “You’re seeing a carryover from those investments.”

But, tax professionals said, they are seeing delays in the handling of their clients’ compliance disputes and audits.

Where glitches and delays are happening

“The layoffs so far have been more targeted on the collection side than on the taxpayer services side,” Werfel noted.

Tax professionals CNN spoke with say they’ve experienced delays in matters where they are trying to resolve disputes for their clients with the agency, or to set up payment agreements pertaining to clients’ prior year taxes.

“(One area I’ve seen) significant challenge is for taxpayers who need to set up installment agreements,” said CPA Miklos Ringbauer, secretary of the California Society of CPAs, who noted there are long wait times to get through on the IRS practitioner hotline to address the issue.

Wisconsin-based enrolled agent David Mellem said he has a client who recently filed an amended 2019 return and paid the back taxes he owed. “But his 2024 refund is being held up, because the IRS records don’t reflect the payment yet,” Mellem said.

Meanwhile, CPA Jim Buttonow in North Carolina and enrolled agent Joshua Youngblood in Texas each said they have experienced delays in getting approval from the agency for their clients’ power of attorney forms. Such approvals, which used to take fewer than five days, are now taking up to 30 days, Youngblood said.

Without having power of attorney for their clients, they can’t talk to the IRS to resolve cases in which the agency may assert that their clients underreported their income or owe back taxes.

Such delays are likely to grow longer if the IRS makes even deeper staff cuts going forward, Mellem said. “Fewer people means more delays.”

Former IRS Commissioner Charles Rettig advised members of the AICPA in a recent town hall to keep copies of everything they’ve sent the IRS pertaining to their clients’ audits. “Some of the folks who are leaving the exam function of the IRS are being instructed to (mark the case) ‘no change’ and close down the particular examination. But if the matters are going to be reassigned — and some will be reassigned — you want to make sure that everything you’ve provided is there,” Rettig said.

Agency upheaval may hurt deficits

If there are further staff cuts, it could also start to hit taxpayer services — and affect your experience when you interact with the IRS on routine issues. “Plans for large reductions in force, if they materialize, will inevitably impede the services side,” Werfel said.

Coupled with cuts in enforcement, it could mean the IRS takes in less revenue overall. “If you’re trying to deal with the deficit, the last thing you want to do is mess around with the IRS. It is the government’s revenue-producing arm,” said former IRS Commissioner John Koskinen.

Money collected by the IRS during tax season is critical to the federal government’s bottom line. As it is, Werfel said, relative to the same period a year ago, “We are seeing early indications of reduced collections. And I’m concerned the trend will worsen by April 15,” he said.

Filing season stats so far

Through March 7, which marked the sixth week of filing season, the actual number of returns received and processed was down about 2% compared to the same period last year, according to the agency’s weekly filing statistics.

But the IRS also reported that it had issued just over 43.6 million refunds, or 1.5% more than it did at the same time last year. The average amount paid was $3,324, up nearly 6% from the comparable period in 2024.

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