IRS Staffing Cuts: Why Refund Delays Are Likely—But Audit Risks Remain High

If there’s one certainty for taxpayers this year, it’s that major changes at the IRS are rippling throughout the tax season. Reduced staffing, budget realignments, and a heavier reliance on automation are creating new challenges for those expecting smooth returns—or quick resolutions to tax notices.

The Current IRS Landscape: Short Staff, High Stakes

Recent federal budget adjustments have resulted in thousands of IRS employees—including seasoned auditors, call center representatives, and crucial processing agents—leaving the agency. This significant personnel reduction isn’t just a bureaucratic shift; it’s reshaping the taxpayer experience across every touchpoint.
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  • Longer refund delays: Anticipate processing times well beyond the typical 21-day window—even for electronically filed returns.
  • Frustrating phone support: Contacting the IRS may test your patience, as support lines face historic wait times.
  • Automated, impersonal audits: With fewer agents, the IRS is doubling down on algorithmic flagging and correspondence-driven audits. That means more form letters and less personalized context during reviews.

Despite diminished staff, the IRS is maintaining—if not intensifying—compliance enforcement efforts, thanks to sophisticated digital systems that never tire.

How IRS Cuts Affect Taxpayers in 2024

If you’re counting on a refund: File as early as possible and thoroughly review your return for accuracy. Even minor mistakes or documentation inconsistencies could lead to outsized delays.

If you receive an IRS notice: Don’t panic. Most notices can be addressed efficiently—but with thin staffing, resolution windows may be extended unless addressed promptly and correctly from the outset.

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The IRS Matching System: Automated Compliance at Scale

Behind the scenes, the IRS’s advanced data-matching platform cross-examines your submitted return against a comprehensive network of third-party reports: employers, financial institutions, brokerages, and payment apps. This system aggressively flags discrepancies, triggering audits or correspondence.

What can trigger instant IRS attention?

  • W-2 income mismatches: Ensure your reported wages align with employer-submitted numbers.
  • 1099 income discrepancies: Freelancer or side hustler income—reported or not—can be identified by the IRS. Even if you didn’t receive a form, undeclared earnings can set off alerts.
  • Missing investment income: Be thorough with 1099-B forms for stocks or crypto transactions. Omissions are easily tracked.
  • Gig economy gaps: Earnings from digital platforms (Venmo, PayPal, Etsy, DoorDash, etc.) must match reports sent to the IRS.
  • Unreported bank interest: Even modest interest income from long-forgotten accounts is visible to the IRS.
  • Early retirement withdrawals: Failure to correctly report and explain early 401(k) or IRA distributions with valid penalty exceptions is a red flag.
  • Large charitable deductions: Oversized donations incongruent with your income profile are automatically scrutinized.
  • Self-employed deductions: While home office and business expense deductions are legitimate, returns are scored against IRS risk algorithms. Overly aggressive claims trigger further review.

Automated matching means the IRS could flag your return for something as small as a clerical error—resulting in automated notices, with real agents only intervening later.

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Tax Strategies for Navigating 2024’s IRS Landscape

This year, the complexity and risk of handling your taxes—or IRS inquiries—solo have only increased. If you receive a notice, a threatening letter, or even suspect a discrepancy, professional representation by an experienced tax advisor or enrolled agent is your best defense.

Contact our team to efficiently resolve IRS correspondence, reduce stress, and ensure you’re fully protected in today’s challenging environment.

Facing an understaffed, tech-driven IRS is not the year to go it alone—ensure your finances, compliance, and peace of mind are secure with expert guidance.

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