As Tax Filing Season Kicks Off, Early Data Suggests A Slow Start

Opening with Expectations and Changes

As the IRS prepared to commence the 2025 tax filing season on January 27, 2025, taxpayers and professionals alike anticipated a routine process. However, unexpected developments soon unfolded. The resignation of the IRS Commissioner, coupled with a hiring freeze and early retirement offers to employees, introduced uncertainty. These changes led to a slower start than expected, with early data showing a notable decline in tax return submissions. The IRS, though, remains unruffled, attributing the initial drop to typical seasonal patterns and delayed document arrivals.

Early Filing Trends

The 2025 season began with a 14% decrease in tax returns compared to the previous year. By January 31, the IRS had received 13,177,000 returns, down from 15,318,000 in 2024. Despite this, the IRS expressed confidence that numbers would normalize as more documents arrive. This optimism stems from the understanding that early filing data can fluctuate, often balancing out as the season progresses. However, the decline from 2023 is more significant at 30%, suggesting underlying issues beyond typical delays.

Confusion and Concern Among Taxpayers and Professionals

Taxpayer confusion was palpable as the season opened, fueled by leadership changes and staffing uncertainties. The absence of a permanent IRS Commissioner and the imposition of a hiring freeze under the Trump Administration created anxiety. President Trump’s suggestions about reallocating IRS roles added to the tumult. Tax professionals noted increased inquiries, with one Florida agent reporting numerous discussions reassuring clients that filing was still mandatory. This uncertainty likely contributed to the sluggish start, prompting some to question the season’s trajectory.

IRS Response to Challenges

In response to these challenges, the IRS exempted critical positions from its Deferred Resignation Program until after the filing season. Roles in Taxpayer Services, Information Technology, and the Taxpayer Advocate Service were prioritized to ensure uninterrupted operations. While the specifics of these exemptions remain unclear, the move signals an effort to stabilize operations. Additionally, the administration’s reversal on encouraging resignations reflects a recognition of the IRS’s crucial role during tax season.

Technology and Website Visits

The IRS website, IRS.gov, saw a significant drop in traffic, with visits plunging 34.8% to 68,287,000 by January 31, 2025, from 104,788,000 the prior year. This decline may be attributed to a lack of updates, with only four press releases issued since the season’s start. The reduced traffic could indicate either decreased taxpayer engagement or reliance on other resources, highlighting the need for improved communication.

Looking Ahead

Despite the current slump, there are glimmers of positivity. Tax refunds have increased, with a 38.2% rise in average amounts to $1,928, likely due to filings from higher-income taxpayers. However, the full picture remains unclear as refunds tied to the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) are delayed until mid-February. As these refunds process, expectations are that filing numbers and refund amounts will rise, offering a clearer view of the season’s progress. The IRS will be closely monitored as it navigates this unpredictable landscape, with ongoing changes in leadership and staffing potentially impacting future operations.