With the tax deadline upon the nation, millions of people have once again enjoyed a smooth tax season and speedy refunds. But warning signs are building that taxpayers could encounter delays and headaches a year from now.
Despite the turmoil in Washington, the 2025 filing season has already been a success for the Internal Revenue Service, my former employer. To its credit, the Trump administration’s Treasury team wisely left the core tax season operations at the IRS largely untouched — for now.
But with major cuts looming for the IRS, there should be cause for concern.
A disastrous filing season 40 years ago — known as the “tax season from hell” — carries ominous warnings signs and parallels that could foreshadow what taxpayers could face in 2026.
“The number one thing the IRS cannot do — ever — is repeat the mistake of 1985 and mess up the filing season for taxpayers and the nation,” said former IRS Commissioner Larry Gibbs, whom President Ronald Reagan chose to clean up the agency in the aftermath of that disaster.
Since then, taxpayers have been able to count on the year-round IRS operation that delivers tax seasons and refunds money annually. These are the biggest checks many taxpayers see all year, averaging $3,116.
A smooth tax season — like the one taking place this year — isn’t something that happens automatically. But when there is a failure at the IRS, it can look like a lot like 1985.
That year, the IRS was putting in place new technology to digitize tax information and modernize processing tax returns. But well-intentioned technology plans were rushed. The intricate pieces of the IRS system unraveled, creating a domino effect of cascading problems.
“The IRS changed out the hardware and software in the service centers. And it just did not work,” Gibbs recounted to me recently on a sunny Florida afternoon overlooking boats docked in a Sarasota marina.
That meant 10 processing centers across the country were unable to quickly process paper tax returns. Problems snowballed due to poor planning and budgetary challenges, including a new computer system with inadequate capacity and faulty software. Unprocessed paper tax returns piled up. In the chaos, tens of thousands of returns went missing.
“Tax returns started stacking up,” Gibbs explained. “You literally couldn’t walk through a service center due to all the stacked-up returns. The employees were pushing them up into the ceilings, they were flushing them down toilets, they were taking them home, throwing them away.”
The system, Gibbs explained, just “broke.”
This meant tens of millions of tax returns — and refunds — didn’t get processed until deep into the fall. Instead of getting a refund in a few weeks, taxpayers found themselves waiting six months or more for their biggest check of the year. Some taxpayers had to file a second, duplicate tax return.
“The IRS problems affected everything across the country,” Gibbs said. “Taxpayers didn’t get their money for months. It affected the national economy. It showed up in the economic readings. It was an unbelievable mess. People were outraged.”
The news headlines were nonstop. But what Gibbs accomplished after he arrived became a textbook example for future IRS commissioners. With the help of his leadership team, Gibbs straightened out the 1985 failures and got the IRS back on track for 1986. He also successfully implemented Reagan’s signature tax reform legislation.
Gibbs is among many in the tax community deeply concerned about history repeating itself.
Today, the IRS is facing a wave of budget cuts and staff losses. While tax season operations have been largely untouched, employees vital to tax time face an uncertain future, with tens of thousands of possible job cuts looming in the weeks ahead.
And like in 1985, tech issues loom large for 2026. The technology team has already lost important staff, with more contemplating leaving. IRS insiders note that the Department of Government Efficiency staff embedded within the IRS has recently started tinkering with the intricate programs that make tax seasons — and refunds — work. People inside and outside the IRS fear unfamiliar people interfering with the complex workings of the agency systems and tax law could be catastrophic for the 2026 tax season.
“The number one thing I tell new commissioners is that whatever you do, you can’t mess up filing season,” Gibbs explained.
With 2026 tax season planning beginning in a few weeks, major questions loom about whether the agency can deliver a smooth tax season next year with fewer staff, distractions about job losses and discussions about major agency overhauls.
Next tax season takes on even greater importance because 2026 will be an election year determining who controls Congress. It is also when the IRS could be implementing new tax legislation now being considered. Cutting IRS resources creates unique political challenges. As 1985 illustrated, a failure at the IRS has far-reaching implications, both economic and political.
Our tax system is built on the concept of “pay as you go” — either through paycheck withholding or estimated tax payments. Prompt refunds are a cornerstone of that concept, with taxpayers counting on speedy refunds. Delayed refunds could erode faith in the tax system and the concept of “voluntary compliance” with tax laws.
Gibbs and others worry that cuts at the IRS could create a ripple effect, including people not paying taxes or simply not filing a tax return. Reduced incentives for refunds, along with drastic reductions in IRS tax enforcement, create major problems for the country’s economic performance, as well as for the goal of reducing the deficit.
The Trump administration must carefully consider these implications for 2026 before slashing core IRS operations. At the end of the day, cuts to the IRS create not just peril for taxpayer bank accounts and the nation’s revenue stream, but for elected officials as well.
Gibbs explained it this way: “If you’re a member of Congress or you’re a taxpayer, the last thing you want is for the IRS to have a bad filing season.”
Terry Lemons spent 26 years at the IRS overseeing communications and congressional affairs, working with six different IRS commissioners. Previously, he served as Washington bureau chief for the Arkansas Democrat-Gazette.