IRS Cuts Could Slow Refunds — But Not Audits: What You Need to Know

Let us just say this:

When the IRS sneezes, taxpayers typically catch a cold.

What about right now?

It's as if the IRS is battling the illness.

Massive layoffs, involving thousands of employees, are already causing ripple effects throughout the system.  If you've filed a return or need a refund this season, you're undoubtedly wondering: Will I be caught up in the mess?

Short answer: Maybe.

Longer answer: It depends on how prepared you are and who you have on your side if the IRS comes knocking.

What's Actually Happening at the IRS?

The IRS has been heavily impacted by the federal government's recent budget changes.  The most recent round of layoffs included auditors, call center representatives, and processing agents.

It's not merely a problem with the staffing chart.

This is about the real-world ramifications for taxpayers like yourself.

• Refund delays are expected to last longer than the usual 21 days, even for those who file their taxes online.
• phone support wait times may make your previous DMV appointment feel like a luxury spa visit.
• Audit processes are projected to become "bumpier."  The IRS will rely more heavily on automated flags and correspondence audits—think threatening letters with less personal subtlety.

In other words, there are fewer personnel behind the desks.  However, the level of compliance enforcement remains consistent.  Perhaps even more, because the machines never sleep.

What Does It Mean for You?

If you anticipate a refund:

File as soon as possible (if you haven't already), and double-check that everything on your return is perfect.  Small errors, including honest typos, can slow things down.

If you receive an IRS notification:

Don't panic.  Seriously.  Notices are frequently the starting point for issues that can be readily resolved... but with IRS personnel so sparse, resolution can be painfully slow if not handled correctly from the outset.

This year, however, it becomes much more vital.

The IRS Matching System: Where the Robots Take Over

Behind the scenes, the IRS operates a huge, high-speed data matching operation.
 They collect data from dozens of third-party sources, including employers, banks, brokers, and even payment applications, and compare it to the statistics you disclose.

Here's what the system is explicitly searching for (and what will result in an automatic flag):

• W-2 income mismatches: What if your employer reports $75,000 and you only report $70,000?  Flagged.
• 1099 Income Mismatches:  Listen up, freelancers and side hustlers: even if a 1099 appears "small" or you didn't receive one because it was less than $600, the IRS typically knows.  Miss one, and you may receive a notification.
• Missing investment income: Brokers provide 1099-B papers for stock sales.  Missed a few trades?  The machine will locate them.AC
• Gig economy salary disparities:  Payment platforms (Venmo, PayPal, Etsy, and DoorDash) are submitting more reports than before.  What happens if your earnings do not match those reported?  Another flag.
• Bank interest: Did you earn $10 in interest on an old savings account that you had forgotten about?  Yup.  Reported.  If an item is missing, it is flagged.
• Early retirement account withdrawals: Did you cash out your 401(k) early?  If the IRS sees a 1099-R with no penalty explanation, it will conduct a fast audit.
• Large charity deductions: If your donation is "too big" in relation to your income, it may be identified for examination.
• Home office deductions and self-employment expenses: Legitimate write-offs are permitted, but the IRS use statistical models to "score" returns for risk.  If you overdo it, expect a second look.

In short:

It's not only whether you committed a major error.

It's whether the algorithm thinks you made one — and if it does, a human person (if available) may be called in to investigate.

And with less people available?

Letters may arrive faster, but they may require more time to repair.

The Big Lesson:

This is not the year to "DIY" your way out of tax troubles.

If you receive a notification.

If you receive a terrifying letter.

If you believe the IRS is ready to raise a red flag at you...

Call our office.

We'll help you cut through the noise, prevent things from snowballing, and ensure your safety.

Because navigating a depleted IRS on your own?

That's a game that nobody wins.