If you've ever filed an amended business tax return and wondered why it seemed to vanish into a black hole, the National Taxpayer Advocate just confirmed you weren't imagining it. In her 2025 Annual Report to Congress, delivered in January 2026, the Taxpayer Advocate revealed that the IRS took an average of more than 13 months to process the 1.6 million business amended returns filed in fiscal year 2025. For comparison, individual amended returns — while still slow — averaged just over 5 months.
That's not a minor administrative hiccup. For a small business waiting on a corrected refund, 13 months can mean the difference between smoothly covering payroll and scrambling for a bridge loan. And according to the same report, the reasons behind the delay go well beyond a temporary backlog — they point to a structural shift in how the IRS is staffed and run.
Why Processing Times Blew Up: A Historic Workforce Collapse
The Annual Report to Congress paints a stark picture of an agency in the middle of unprecedented contraction. The IRS started 2025 with roughly 102,000 employees and ended the year with about 74,000 — a 27% reduction in a single calendar year, among the largest workforce declines in the agency's modern history.
The cuts weren't spread evenly. The division that handles most business tax accounts — Small Business/Self-Employed (SB/SE) — was hit hardest of all:
- January 2025: 24,122 employees
- December 2025: 15,012 employees
- Net reduction: 37.77%, or roughly 2 out of every 5 SB/SE employees
Other functions saw significant, though smaller, reductions: Taxpayer Services fell about 21% (from 42,122 to 33,264 employees), and Information Technology dropped more than 31%. The IRS's Direct File program, which let some taxpayers file for free directly with the agency, shrank a striking 88.46% — effectively winding the program down.
Put simply: the part of the IRS that reviews, corrects, and issues refunds on business returns lost more than a third of its people in under a year, while the volume of amended returns needing review didn't shrink at all. The math on wait times explains itself.
It's Not Just Amended Returns — the Whole System Is Under Strain
The staffing collapse rippled through nearly every taxpayer-facing service the IRS runs:
- Phone service: The IRS fielded over 100 million calls in 2025 and routed 35 million of them to voicebot automation. But taxpayer satisfaction with those bots was mixed at best — only about 50% of callers found the refund-status bot helpful, and just 40% said the same about the amended-return bot.
- Customer service reps (CSRs) were stretched thin even as staffing fell — the report noted idle time swings of up to 34% during filing season for the CSRs who remained, a sign of uneven staffing and scheduling rather than an oversupply of help.
- Identity theft cases — already one of the IRS's slowest categories — now average more than 21 months to resolve.
- 3.6 million taxpayers received their refunds later than the IRS's own normal timeframes in 2025.
The Taxpayer Advocate's report is blunt about what's coming next: 2026 will be harder, not easier, because the workforce cuts are colliding with the retroactive tax-law changes from the One Big Beautiful Bill Act, which require IRS staff to reprogram systems and reinterpret rules for returns that have already been filed. Fewer people, doing more complex work, on a compressed timeline — that's the setup for the year ahead.
What the Report Recommends (and Why Congress May Not Act Fast)
Each year, the Taxpayer Advocate's report includes a "Purple Book" of legislative recommendations — this year, 71 of them. A few stand out for small businesses:
- Require the IRS to process refund claims within one year. This would directly target the exact delay small businesses are experiencing right now — but it requires new legislation, not just an internal policy change, so relief isn't guaranteed on any particular timeline.
- Expand U.S. Tax Court jurisdiction to hear a broader range of refund disputes, giving taxpayers another venue when administrative channels stall.
- Set minimum standards for non-credentialed tax return preparers, aimed at reducing the errors that trigger amended returns and IRS correspondence in the first place.
These are recommendations to Congress, not new rules in effect today. Realistically, small businesses need to plan around today's processing times, not around a future fix that may or may not become law.
How to Protect Your Business While the IRS Is Understaffed
You can't speed up the IRS, but you can control how exposed your business is to its delays. A few practical steps:
1. File it right the first time. Every accountant will tell you this, but it matters more than ever: an amended return exists specifically to fix an error, and errors are exactly what's landing in a 13-month queue right now. Careful, accurate original filings — with clean, well-organized books behind them — are the single best way to avoid needing an amendment at all.
2. Don't count on an amended-return refund for near-term cash flow. If you're amending a return to claim money back, budget as though that refund won't arrive for over a year. Treat it as a bonus if it comes sooner, not as a line item in your near-term cash plan.
3. File electronically wherever the form allows it. E-filed returns are still processed faster than paper ones, and reduce the chance of transcription errors on the IRS side adding further delay.
4. Respond immediately to any IRS correspondence. With SB/SE understaffed, a request for additional documentation can tack weeks onto an already-long timeline. Keep your records organized and ready so you can respond the same week a notice arrives, not the same month.
5. If you owe more tax after amending, pay it promptly regardless of processing speed. Interest and penalties on unpaid tax continue to accrue on the IRS's calendar, not on the pace of its review — filing quickly and paying what's owed limits your exposure even while your case sits in the queue.
6. Escalate stalled cases through the Taxpayer Advocate Service if a delay causes genuine financial hardship — that's precisely the channel the office exists to provide when normal processing breaks down.
Keep Your Books Clean From the Start
The clearest lesson in this year's report is that IRS review capacity is shrinking exactly as the tax code is getting more complicated — which means the businesses least likely to need an amended return in the first place are the ones best insulated from these delays. That starts with accurate, well-documented bookkeeping throughout the year, not a scramble to reconstruct records after an error surfaces.
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