The Internal Revenue Service is currently experiencing significant turmoil, with reports of job losses this tax season making headlines. Despite this, early tax filers are already receiving their tax refunds through bank deposits and mail deliveries. In Michigan, 153 probationary IRS employees represented by the union have been laid off, impacting the ongoing tax season, according to the National Treasury Employees Union. Doreen Greenwald, the union’s president, expressed concerns about the layoffs affecting local economies and middle-income families nationwide. The union is challenging these terminations, labeling them as “arbitrary and unlawful.” Meanwhile, tax season is progressing, with many IRS workers still on duty and tax preparers actively assisting clients with filing their 1040 forms.
As of the first four weeks of the tax season through Feb. 21, the average federal income tax refund stands at $3,453, a 7.5% increase from the previous year. Over $102.2 billion in federal income tax refunds have been issued, marking a 10% rise from the same period last year. The IRS has processed over 29.6 million refunds, a 2.3% increase from the previous year.
Despite the ongoing tax season, there has been a decline in the number of early tax returns submitted to the IRS compared to last year. Potential reasons for this decrease include concerns about tax liabilities, expectations of retroactive tax cuts, and confusion over new forms like the 1099-K. Tax professionals have observed a 4.2% decrease in early income tax returns this year, with 42.7 million returns received by the IRS through Feb. 21. Both professionals and self-preparers have filed fewer returns, with a 5% drop in e-filed returns from professionals and a 3.3% decline from self-preparers.
Various factors, including the influx of 1099-K forms, may be contributing to the lower number of early tax returns filed in 2025. Some individuals are still gathering necessary paperwork or adjusting to new regulations. Taxpayers are receiving 1099-K forms from payment card companies, payment apps, and online marketplaces, potentially complicating the filing process for those with side jobs or unconventional income sources.
In 2024, the threshold for businesses to receive a 1099-K for their transactions was lowered to $5,000 from the previous $20,000 requirement with over 200 transactions in 2023 and earlier years. Tax professionals advise caution as the amount on the form may not reflect the total taxable income.
For example, if you bought concert tickets for $500 and sold them for $900, the profit made is taxable, accounting for the initial purchase price. On the other hand, selling a handbag at a loss does not result in taxable income, as personal item losses are not deductible. Refunds for earned income tax credits have started to be processed for lower-to-moderate income households.
The IRS has delayed issuing refunds for returns claiming the earned income tax credit or additional child tax credit until mid-February to prevent fraudulent claims. Many early filers can expect refunds by March 3 if filed online with direct deposit. The IRS’s “Where’s My Refund?” tool will provide updates for those claiming these credits.
Despite ongoing job cuts and organizational changes at the IRS, the tax season has faced questions about its effectiveness. The agency had previously hired thousands of new employees to enhance taxpayer services, technology, and enforcement efforts, targeting high-income individuals for audits. Funding for the IRS was reduced after the passage of the Inflation Reduction Act of 2022, affecting its staffing and services.
Currently, there are open full-time positions for revenue agents in Detroit. These agents are responsible for examining individuals, businesses, tax-exempt organizations, and government entities to calculate their federal tax liabilities. They may interact with taxpayers, their representatives, certified public accountants, and tax attorneys. The salary range for these positions varies widely, from $41,000 to $108,000 per year, based on factors like education, experience, and current salary. Qualified candidates may also receive a recruitment bonus upon agreeing to serve for at least one year.
There have been recent changes at the IRS, including a halt on hiring following an executive order issued by President Trump to address concerns about the agency’s expansion. Leadership shifts have also occurred, with IRS Commissioner Danny Werfel resigning and Doug O’Donnell taking over as the deputy commissioner before announcing his upcoming retirement. Melanie Krause has been appointed as the acting commissioner, and former U.S. Rep Billy Long from Missouri has been nominated to be the next IRS commissioner.
The impact of these changes on tax refunds and return processing remains uncertain. If e-filed returns are accepted by the IRS starting March 3, taxpayers may expect refunds via direct deposit by March 14, barring any issues. However, filing during the peak season from late March to April 15 could result in slightly longer processing times. For more information, reach out to personal finance columnist Susan Tompor at stompor@freepress.com.
