“Backlogs, Job Holes Plague IRS in Tax Season After DOGE Cuts”

“Trump’s promise to modernize the IRS hasn’t materialized.”

“We’re just not able to provide timely service to people”

These were just three of the points Bloomberg Tax reported yesterday on the dismal state of the IRS.

It is more important than ever before for taxpayers to avoid tax snags. The issues I see affecting people now are identity theft, unprocessed refunds, miscalculation confusion, and wage tax issues.

Identity Theft

I see more of these problems almost every week. The IRS identity theft backlog is staggering. Resolution times have stretched to nearly two years per case. If you haven’t already, get an IP PIN. The IRS Identity Protection PIN program is open to all taxpayers and it’s the single best preventive step you can take. If you’ve already been victimized, file Form 14039 immediately and understand that you are now in a queue that the IRS barely has the staff to work. Don’t wait for the IRS to contact you. Be proactive. Document everything.

Unprocessed Refunds

The IRS claims 90% of e-filed refunds go out within 21 days. That number hides the real problem. If your return gets flagged with a math error, a mismatch, an amended return then you’re no longer in the 90%. You’re in the backlog, which is already running over 129% above pre-pandemic levels with no clear plan to reduce it. The practical advice: e-file, double-check every number, and don’t file a return that you know has an issue just to “get it in.” A clean return filed right beats a sloppy return filed fast. Paper filers face even worse odds. Processing a paper return costs the IRS 43 times more than an electronic one, and the much-touted Zero Paper Initiative has digitized barely 4% of its target volume.

Always request electronic payment of refunds, not paper checks.

Employer Wage Tax Problems and Why They Become Your Problem

A slowing economy and the tariff crisis means that more employers are struggling to keep up with their wage tax filings and payments. This is a serious legal liability that threatens both employers and employees.

When a business falls behind on payroll taxes, it doesn’t just owe the IRS money. It owes the IRS trust fund money. That’s the income tax and FICA withheld from employees’ paychecks. The IRS treats this differently than ordinary business debt because that money was never the employer’s to spend. It belonged to the employees and the government the moment it was withheld. When it gets diverted to cover rent or payroll or inventory, that’s when the Trust Fund Recovery Penalty kicks in. This is a 100% personal assessment against any “responsible person” who willfully failed to pay it over. That means owners, officers, and sometimes even bookkeepers.

For employees, the damage is different but just as real. If your employer withheld taxes from your check but never sent them to the IRS, your W-2 may not match what the IRS has on file. Or worse, the IRS may have nothing on file at all. That creates a refund freeze, a mismatch notice, or an outright rejection of your return. And in the current environment, getting that corrected could take a year or more.

If you’re an employer behind on 941 deposits, don’t pretend it will fix itself next quarter. It won’t. The IRS penalty and interest structure on payroll taxes is punishing by design, and the longer you wait, the fewer options you have. If you’re an employee and something looks wrong on your pay stub or W-2, ask questions now. Not in April.

Confusion over new laws

This is the sleeper problem of 2026. The One Big Beautiful Bill made retroactive changes to 2025 tax law. The much misunderstood tax deductions on overtime, tip income exemptions, and the new senior deduction caused confusion this year. Residential energy credits are also often misunderstood. Wage tax withholding tables were never updated to reflect those changes during 2025. That means millions of taxpayers had too much withheld all year. I see just as many taxpayers with the opposite problem. They made adjustments to their withholding and cash flow expecting lower taxes that just did not materialize. It created a processing complexity on the IRS side and confusion on the taxpayer side. If your W-2 and tax return doesn’t match what you expect, don’t panic, but don’t ignore it either. Understand what changed and why before you file. If you’ve already filed before learning of a problem, take the time to get a professional review of the entire tax accounting before responding.

What You Should Actually Do

The blunt sharp reality is that IRS is not going to rescue you if something goes wrong. The agency lacks experienced management. IRS lost a quarter of its workforce, its modernization plan is stalled, and the staff that remains is undertrained and overwhelmed. Here’s what that means for you:

File electronically. File accurately. Respond to every IRS notice immediately and by the method they specify. Keep copies of everything. And if you’re dealing with anything beyond a straightforward W-2 return: an S corporation, rental income, a small business, crypto, day trading, get professional help before you file, not after you get the letter.

The IRS has always been slow. Now it’s slow and short-staffed, undertrained, and lacking experienced managers. The best strategy is to never need them in the first place.