IRS LAYOFFS IN 2025: HOW THEY COULD AFFECT YOUR TAX RETURN DEADLINE AND REFUND TIMELINE

IRS Layoffs in 2025: How They Could Affect Your Tax Return Deadline and Refund Timeline

IRS Layoffs in 2025: How They Could Affect Your Tax Return Deadline and Refund Timeline

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Massive budget cuts under the Department of Government Efficiency in early 2025 led to the IRS losing a third of its staff and this is seriously messing things up. They’re struggling to meet tax return deadlines, customer service is terrible with crazy long hold times and some people are waiting months for their refunds, especially those who qualify for the Earned Income Tax Credit. Due to all the delays, folks are increasingly using e-file, direct deposit and tax return services to get through tax season. Making matters even worse, Congress slashed $42 billion from the IRS’s modernization budget which puts the future of their free filing tools in doubt (Tax Policy Center).

Overview of IRS Layoffs in 2025


The DOGE Directive


In January 2025, the Trump administration’s DOGE program pushed for agencies to implement “efficiency cuts”, especially new and less critical positions. The IRS, which had close to 100,000 employees at its highest point in late 2024, was one of the main places hit with those cuts.

Scale and Scope of Reductions



  • 7,000 probationary layoffs took effect on February 20, 2025 disproportionately impacting compliance and enforcement divisions .

  • 22,000 deferred‑resignation buyouts followed offering full pay and benefits through September to those who opted to leave .

  • Additional RIF notices could eradicate another 5,000 positions by mid‑year, potentially shrinking staff to 60,000-70,000, 40% below pre‑cut levels .

  • Key functions hit include manual review, audit support, taxpayer correspondence and phone support, sparking concerns over service bottlenecks (AP News).


Regional Impact


Looks like the IRS campus in Kansas City is facing some major changes. Over 1,200 employees are looking at layoffs or early buyouts. Local non-profits are worried this will seriously impact services for low-income taxpayers and how public health grants are managed (AP News).

Implications for the Tax Filing Season


Backlogs and Processing Delays


Before the reductions, e-filed returns were usually acknowledged within a day or two and refunds arrived in 2-3 weeks. Now:

  • Manual‑review backlog up 20% pushing some return clearances into late May and June (Fortune).

  • Paper returns awaiting scan and ingestion have surged to 12 million, many stalled at the post‑scan “data digest” phase due to understaffing (Thomson Reuters Tax Solutions).

  • “Depressed” audit rates are down by 15% year‑over‑year as examiners are let go or reassigned shifting focus away from enforcement (CNN).


Call Center Delays


Reaching an IRS agent now takes about 35 minutes, up from 17 minutes last year, according to AP News. Lots of people are giving up on waiting and trying to use the website but even that can be slow or not work correctly.

Impact on Different Taxpayer Segments


EITC and Low‑Income Filers


Getting your refund when you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit usually means waiting a bit longer, about 21 extra days for verification. However, with fewer people working at the IRS these days, those waits can stretch way out like 60 to 75 days which can really hold up money that families need (Fortune).

Small Businesses


Small business tax returns, especially if they include Schedule C, tend to get a closer look. A lot of small business owners are finding that their refunds are taking longer to process than they were originally told (Squire & Company).

American Expatriates


Figuring out FBAR and FATCA is already tough for expats. MyExpatTaxes says the IRS having less staff to handle mail might mean it takes them longer to answer notices about potentially taking away passports for not filing taxes on time.

Refund Timeline Outlook


Electronic vs. Paper Returns


Even though e-filing is still quicker than paper, the difference isn’t as big anymore. The IRS got 98 million e-filed returns by April 15th which is a small increase of 1.2% from last year. However, the average wait time for e-file refunds actually went up from 21 to 28 days.

“Where’s My Refund?” Tool


The portal is still the go-to for status checks. However, the data feed updates every 72 hours now instead of the 24-hour refresh we had in 2024. Apparently, it’s due to some IT staffing adjustments (Forbes).

Anecdotes from the Front Lines



  • Client Case: A Seattle CPA reported one client’s $4,200 refund stalled in “processing” for six weeks before finally shipping via cheque on March 30 (Fortune).

  • Low‑Income Clinic: Georgia Tax Clinic’s Eric Santos noted an uptick in clients missing rent and utility deadlines while awaiting refunds with no clear call‑center recourse (AP News).


Technology and Digital Options


The Fate of Direct File


Direct File, the free IRS e-file facility, started small in 2024 and then jumped to 25 states in 2025. People really liked it, like 90% of 15,000 users were happy (Diario AS). However, news is saying the Trump administration might shut it down before the 2026 tax season. They’ve supposedly put a freeze on it and are planning to end the program altogether (Federal News Network).

Modernization Setbacks


The IRS got $80 billion for upgrades but Congress took back $42 billion. Now they’re left with just $38 billion which is barely enough for everything they need to do (Tax Policy Center). This means they’ve had to slow down hiring for IT, stop testing out AI tools and cut back on cybersecurity staff (Reuters).

Tax Return Services and Alternatives


Free vs. Paid Options



  • IRS Free File: Available to 70% of taxpayers, yet only 3% utilized it in 2023 due to marketing gaps .

  • Paid Software: TurboTax, H&R Block, TaxAct – features error checks and guided filing though average costs range from $60–$100 for basic returns.

  • CPA/Enrolled Agent: Fees average $200–$400 with audit support and personalized advice.


Choosing Wisely


When figuring out how to do your taxes, a few things matter. How complicated are your taxes? Are you expecting a big refund? And do you need help along the way?

If you don’t make a lot of money, Free File or VITA clinics are great. They’re there to help folks who need free tax prep and filing assistance.

For more tricky situations like having investments, rental income or being self-employed, a professional tax return service or software for complex returns might be the way to go. They can guide you through the rules and make sure everything’s right. Also, if you’re expecting a large refund, you might be okay spending a bit more for professional assistance from firms providing tax return services (like Glocal Accounting Services) to get the most back.

In the end, the best tax filing option depends on you. Think about how complex your taxes are, the refund amount and how much help you need. That’ll help you pick what works best and make sure your taxes are done right and on time.

Congressional and Policy Responses



  • Oversight Hearings: Senate Finance Committee has summoned IRS Commissioner Danny Werfel to explain service degradation and staffing plans (Center on Budget and Policy Priorities).

  • Funding Proposals: House Republicans aim to rescind another $10 billion while Democrats push to restore full IRA funding and authorize retroactive rehiring of probationary staff (Center on Budget and Policy Priorities).

  • Legislative Fixes: Bipartisan bills have been introduced to guarantee minimum staffing levels through FY 2026 though passage remains uncertain.


Proactive Steps for Taxpayers



  1. File Early and Electronically: Beat backlogs by e‑filing as soon as forms are available.

  2. Direct Deposit: Bypass mail delays and paper‑check queues.

  3. Accurate Reporting: Double‑check all entries, especially SSNs and bank details.

  4. Extension If Needed: File Form 4868 by April 15 to avoid late‑filing penalties.

  5. Document Everything: Keep proof of e‑file acknowledgments and bank statements in case of IRS inquiries.


Conclusion


The IRS is facing some staffing changes and that might mean things take a bit longer than usual. Think possible delays with tax returns and refunds and a race towards the US tax return deadlines. In order to stay ahead of the game, e-file your return and get your refund by direct deposit – it’s usually quicker. If your taxes are complicated, consider tax return services by expert individuals or firms. We, at Glocal Accounting Services, provide an expert team of finance professionals to help you get the maximum returns.

Keep an eye on IRS updates as they might share info on potential delays. Basically, being prepared and informed can really help you navigate tax season this year with fewer headaches. Just a reminder that things might move a little slower due to what’s happening at the IRS but there are steps you can take to help smooth things out.

FAQs


Q1. Will the US tax return deadline be extended due to IRS staff cuts?
A. No formal extension for individual filers has been announced; April 15, 2025 remains the deadline .

Q2. How long will refunds take in 2025?
A. E‑file/direct‑deposit refunds now average 28 days; paper returns and certain credits can stretch to 75 days or more (Fortune).

Q3. Are there fee‑free tax return services available?
A. Yes, IRS Free File covers most low‑ and moderate‑income filers; Direct File (in 25 states) remains free but is slated for termination (Diario ASIRS).

Q4. How can I check my refund status?
A. Use the IRS “Where’s My Refund?” tool; expect updates every 72 hours instead of daily (Forbes).Q5. What if I miss the US tax return deadline?
A. Late filers face a 5% monthly penalty (max 25%), plus interest. Filing for an extension avoids the late‑filing penalty but not late‑payment interest.

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