After Elon Musk’s Department of Government Efficiency cut more than a quarter of the IRS workforce, the agency said it still processed 140.2 million individual returns and issued more than 90.4 million tax refund payments in the 2026 tax season.
The IRS said the season was successful, even as it expects to end 2026 with 74,000 employees, down from a 100,000-person workforce before the cuts began. Douglas O’Donnell, the former acting commissioner, said the effects will be felt for years.
Douglas O’Donnell on the IRS
O’Donnell, who served as acting commissioner from November 2022 to March 2023 and again from January to February 2025, said he had been worried about whether the agency could keep carrying out its mission. “I’ve been very concerned with the ability of the agency to carry out on its mission, whether it’s at the services level or enforcement level, but also just in general to be a functioning federal government agency going forward,” he said.
He also said the agency’s problems did not begin with DOGE. “It was clear that there had been underinvestment for a number of years across multiple administrations,” he said. “So it’s not pointing any fingers here.”
IRS staffing and refunds
An IRS spokesperson said the agency delivered a “historic, successful 2026 filing season” while “efficiently processing returns and issuing average refunds that were 11 percent higher than last year.” The same statement said Frank Bisignano “remains committed to maintaining the right workforce to deliver the world-class service American taxpayers deserve.”
The numbers show what the agency managed to do with fewer workers: 140.2 million individual returns and more than 90.4 million refunds. That leaves taxpayers in the same filing cycle with an agency that says it can still move refunds at scale, but with less room if paper handling, enforcement, or service demand rises.
Paper costs and KPMG
The staffing cuts landed alongside a long-running effort to reduce paper-processing costs. A February report from the Treasury Inspector General for Tax Administration said paper returns make up just 6% of all returns but 72% of processing costs. The IRS plans to cut the expense of paper processes from $450 million to less than $20 million by 2029.
Douglas O’Donnell now serves as the senior managing director in the KPMG Washington National Tax practice. In April, Frank Bisignano told the Senate Finance Committee that the IRS had cut $2 billion from its information technology budget without any operational disruptions, saying the agency achieved those savings by renegotiating, scaling back, and in some cases eliminating contracts.
For taxpayers, the immediate question is less about the IRS’s filing-season scorecard than whether the agency can keep that pace as staffing stays lower and paper work remains expensive. The agency says it has, for now; O’Donnell’s warning is that the cost of the cuts will show up later, when the workload does not shrink with the headcount.
