Why It Matters

The IRS is struggling under the weight of budget cuts and staffing reductions, leaving millions of taxpayers unable to reach the agency or get their refunds. Sen. Mike Crapo (R-ID), Chair of the Senate Finance Committee, will hold a hearing on the Taxpayer Assistance and Service Act on Thursday, July 30, which proposes commonsense fixes to Internal Revenue Service administration and procedures.

More than 48 million calls flooded IRS phone lines during the 2026 filing season, but telephone assistors answered only 21 percent of them. Thirty-seven percent of calls ended in disconnects. More than 500,000 identity theft victims are waiting an average of 20 months for their refunds, a delay that National Taxpayer Advocate Erin Collins called unconscionable. For many low- and middle-income taxpayers, waiting nearly two years for a refund can mean falling behind on rent, utilities, transportation costs, and other basic living expenses.

The crisis stems from budget decisions. A bipartisan spending agreement finalized in January 2026 cut the IRS's annual budget by $1.1 billion, a nine percent reduction from $12.3 billion to $11.2 billion. The agreement also rescinded $11.7 billion in remaining Inflation Reduction Act funds designated for IRS modernization. IT staffing at the agency has been cut by 27 percent. The IRS's free online tax filing tool, Direct File, was shut down ahead of the 2026 filing season.

More than 14 million returns were reportedly suspended during processing, and more than 1 million taxpayers waited an average of 5.5 weeks for refunds.

The Legislative Response

[The Taxpayer Assistance and Service Act ](https://www.finance.senate.gov/chairmans-news/crapo-wyden-introduce-bipartisan-irs-administration-reform-package)is an attempt to address the operational collapse without massive new spending.The Government Accountability Office has called for granting the IRS explicit authority to establish professional requirements for paid preparers, and has made numerous recommendations to improve oversight of preparers that remain unimplemented. The unregulated tax prep industry has flourished as the IRS has weakened, creating additional pressure on the agency's already strained audit and compliance functions.

Ranking Member Ron Wyden (D-OR) stated that there is little doubt the numbers will show IRS customer service has gotten worse as a result of DOGE and Trump layoffs.

Access the Legis1 platform for comprehensive political news, data, and insights.

Spot something wrong? Report an issue with this article