The IRS received 140.2 million individual returns and processed 138.6 million during the 2026 tax season, issuing more than 90.4 million refunds after the Department of Government Efficiency (DOGE) cut more than a quarter of its roughly 100,000-person workforce. The agency said the filing season was successful and average refunds were 11% higher than a year earlier as Americans benefited from the President’s Working Families Tax Cuts. Former acting Commissioner Douglas O’Donnell warned that the impact of the cuts is likely to emerge over time through weaker enforcement, taxpayer services and modernization. IRS enforcement revenue fell 5%, or nearly $5 billion, in fiscal 2025, while the agency opened more than 120,000 fewer audits and lost roughly 5,000 enforcement employees heading into 2026. The IRS’s discretionary budget declined from $12.2 billion in fiscal 2025 to $11.2 billion in fiscal 2026 and is projected to fall to $9.8 billion in fiscal 2027. The agency faces longstanding modernization challenges, including paper returns that represent about 6% of filings but 72% of processing costs. It aims to reduce paper-processing expenses from $450 million to less than $20 million by 2029, while continuing work on fraud detection, digital services and AI. The funding reductions could also affect enforcement operations and Direct File, a free federal filing program launched in 2024.