IRS National Taxpayer Advocate 2025 Annual Report to Congress: Key Takeaways for the 2026 Filing Season

The Taxpayer Advocate Service has released the National Taxpayer Advocate’s 2025 Annual Report to Congress, one of the most important documents tax professionals rely on to understand how the IRS is really functioning.

The report is designed to be fully independent. It is delivered directly to Congress without prior review by the IRS or the Treasury Department. While it notes that taxpayer service improved in 2025, the central message is forward-looking. The 2026 filing season is expected to be more challenging, especially for taxpayers who encounter problems such as notices, amended returns, identity verification, refund holds, or account resolution issues.

For CPAs, tax attorneys, and business owners, this report offers early warning signals that should influence planning, staffing, and client communication now.

Key takeaways

• The IRS processed most routine individual returns efficiently in 2025, but taxpayers who encountered issues such as notices, amended returns, or identity verification faced significantly longer delays, a trend expected to continue into the 2026 filing season.

• IRS staffing levels declined materially, with the workforce shrinking by roughly 27 percent and customer service representatives reduced by more than 20 percent, increasing the likelihood of slower correspondence handling and delayed issue resolution.

• Identity theft remains one of the most serious unresolved taxpayer problems, with Identity Theft Victim Assistance cases taking an average of nearly 21 months to resolve, often delaying refunds across multiple tax years.

• Refund delays and suspended returns continue to affect millions of taxpayers, particularly where returns involve mismatched income data, paper filings, or error resolution, reinforcing the need for proactive filing accuracy and client communication.

• IRS phone and service performance metrics may overstate real accessibility, as a relatively small share of callers reach live representatives, requiring practitioners to plan for repeated contact attempts and extended resolution timelines.

What happened and why this report matters

Each year, the National Taxpayer Advocate identifies the most serious problems taxpayers faced during the prior year. The report also provides administrative and legislative recommendations to improve tax administration and protect taxpayer rights.

The 2025 Annual Report includes:

• Ten “most serious problems” impacting taxpayers

• Data-driven analysis of IRS operations and performance

• Legislative recommendations submitted to Congress

The Advocate also released a companion legislative volume known as the 2026 Purple Book, which outlines 71 recommendations designed to strengthen taxpayer rights and improve IRS accountability.

Together, these materials shape congressional oversight and often influence future tax administration policy.

Key findings tax professionals should act on now

1. IRS staffing reductions increase risk across the system

One of the most cited findings in the report is the sharp reduction in IRS staffing. According to the Advocate, the IRS workforce declined by approximately 27 percent, falling from about 102,101 employees to 74,465 as of December 18, 2025.

Customer service representatives were hit especially hard, with a reported 22 percent reduction.

This matters to tax professionals because reduced staffing does not affect all functions equally. Manual processes are impacted the most. That includes correspondence handling, amended returns, account adjustments, penalty abatement requests, and identity theft resolution. Expect longer cycle times and fewer resolution options when issues arise.

2. Identity theft cases continue to take nearly two years

The report highlights ongoing challenges in the Identity Theft Victim Assistance program. Inventory remains high, with roughly 316,000 cases in the system. Average resolution time is approximately 21 months.

For affected taxpayers, identity theft is not just an inconvenience. It can delay refunds for multiple filing seasons and create serious cash flow strain. For practitioners, these cases require long-term monitoring, proactive communication, and careful documentation.

3. Refund and return processing delays remain a major issue

Even in a year described as relatively successful, millions of returns were suspended during processing. The Advocate cites more than 33.5 million individual submissions affected by issues such as error resolution, unpostable returns, identity filters, and processing rejects.

Separately, tax publications summarizing the report note that approximately 3.6 million taxpayers received refunds outside normal timeframes, with paper filers experiencing the longest delays.

Filing early helps, but it does not eliminate risk. Returns with mismatched W-2 or 1099 data, name or Social Security number issues, paper filing, or amended filings remain highly vulnerable to delay. Setting realistic client expectations is critical.

4. IRS phone metrics may overstate accessibility

The report also questions how the IRS measures phone service. The commonly cited “Level of Service” metric can appear strong even when a relatively small percentage of total callers reach a live representative.

In one example discussed in the report, only about 26 percent of callers actually spoke with a customer service representative.

Firms relying on published IRS service metrics may underestimate the time required to resolve client matters. Call attempts, follow-ups, and documentation should be built into workflow planning.

What CPAs, tax attorneys, and business owners should do next

Based on the risks identified in the report, professionals should consider the following actions:

• Educate clients early about potential delays involving notices and amended returns

• Strengthen documentation practices, including call logs and submission proof

• Identify clients at higher risk for identity theft delays and plan accordingly

• Reduce paper filing wherever possible

• Create standardized processes for IRS notice intake and response

These steps help protect both clients and firm capacity during a more constrained filing season.

Conclusion

The 2025 Annual Report to Congress confirms a key reality. Routine returns may continue to process smoothly, but the system struggles when taxpayers move outside the standard path.

With fewer IRS employees and increasing complexity, tax professionals who plan defensively will be best positioned to manage risk, protect cash flow, and maintain client trust in 2026.

Try Bizora today! Bizora helps CPAs, tax attorneys, and business owners stay ahead of IRS operational risks, legislative changes, and compliance issues before they become emergencies.

FAQ

What is the National Taxpayer Advocate’s Annual Report to Congress?

It is an independent report submitted directly to Congress that identifies major taxpayer problems and recommends administrative and legislative solutions.

What were the biggest warnings for the 2026 filing season?

The Advocate emphasized IRS staffing reductions, increased complexity from new tax laws, and continued strain on manual processing systems.

How significant were the IRS staffing reductions?

The report notes an overall workforce reduction of about 27 percent, along with a 22 percent reduction in customer service representatives.

Why are identity theft cases still such a concern?

Because average resolution times remain around 21 months, delaying refunds and creating long-term compliance challenges for affected taxpayers.

What should business owners take away from this report?

If an IRS issue arises, resolution may take longer in 2026. Conservative cash flow planning and fast, accurate responses are more important than ever.