IRS Reports Higher Tax Refunds in 2025 Despite Operational Hurdles

Adam Tahir
May 8
2 min read

The IRS has released updated data showing that the average tax refund for the 2025 filing season rose by 3.3% compared to 2024 — up to $2,945 from last year’s $2,852. This increase, largely driven by inflation-related adjustments to deductions and tax brackets, is welcome news for millions of taxpayers.

But behind the headline lies a more complex story: even as refunds rise, the IRS continues to face internal operational challenges that could affect future service levels and turnaround times.

Why Refunds Increased in 2025

Several factors contributed to the rise in average refunds:

1. Inflation Adjustments to Brackets and Deductions

The standard deduction increased to $15,000 for single filers and $30,000 for married couples, reducing taxable income across the board.
Bracket thresholds also rose, minimizing the impact of bracket creep for taxpayers who received cost-of-living wage increases.

2. Expanded Earned Income and Child Tax Credits

Some pandemic-era credit expansions remained in place or were modified favorably for low- to middle-income households.
Refundable portions of key credits remain a significant driver of larger refunds.

The Operational Reality: Staff Cuts and Service Bottlenecks

Despite positive refund numbers, the IRS is under pressure. Recent reports indicate:

A loss of over 30,000 employees due to retirements and layoffs in the past two years.
Reduced funding from rescinded Inflation Reduction Act allocations, which had originally been intended to modernize IRS systems and expand customer service.
Increased reliance on automated systems to process returns and manage inquiries — with mixed effectiveness.

Tax professionals have noted longer wait times for account resolution and delays in paper return processing, especially for amended returns or identity verification cases.

What This Means for Taxpayers and CPAs

1. Faster Refunds — For Now

Electronic filers using direct deposit continue to see refunds issued within 21 days, but that window is growing more fragile as workloads increase.

2. Be Cautious with Paper Filings

Paper returns, especially with attachments or complex elections, are more likely to face delays. Encourage clients to file electronically whenever possible.

3. Limited Access to Live Support

With staffing shortfalls, the IRS is triaging its call center availability. Clients with basic issues may have trouble reaching a representative.

Final Thought

While higher refunds are good news for U.S. households, the IRS’s internal constraints may challenge the consistency of that experience in future years. As modernization efforts stall and workforce gaps widen, practitioners should prepare clients for possible delays, documentation requests, and more reliance on self-service portals.

At Bizora AI, we continue to track IRS trends and help CPA firms streamline research, return reviews, and client communications — so you can stay focused even when the IRS isn’t.