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This tax season, many Americans share a sense of reluctance when it comes to filing their federal income taxes. Data from the IRS and survey results reveal an increasing trend of hesitation among taxpayers as the 2025 tax season progresses.
According to the IRS, there has been a noticeable decline in the number of tax returns submitted compared to earlier years.
Several factors could explain this trend, including worries about reductions in the IRS workforce and prevailing economic uncertainties that are making taxpayers wary.
Key Insights on Tax Filing Trends
A survey conducted by Qualtrics for Intuit reveals interesting insights from 1,003 participants. Approximately 25% of respondents expressed less concern about making mistakes on their filings this year, yet nearly half voiced anxiety over the timeline of receiving their refunds.
The survey also highlighted that 17% of millennials considered not filing taxes altogether, citing a belief that the likelihood of an audit has diminished due to staff reductions within the IRS.
What implications does this have for taxpayers? Here’s what you need to know.
Filing Trends for 2025
Since the 2025 tax filing period began on January 27, the IRS has reported a 1.7% decline (over 1.2 million returns) in processed returns compared to the same timeframe in 2024.
This decrease comes despite a rise in average refund amounts, suggesting that significantly fewer individuals are filing their returns early or at all this year.
Former IRS Commissioner Charles Retting stated that many accountants and tax professionals are fielding questions from clients like, “Why should I file my taxes? Why pay taxes if the IRS may be abolished?” According to Bloomberg, this sentiment is echoed among a broader audience.
Fiscal Ramifications – The IRS anticipates a staggering $500 billion drop in tax revenue this year, equating to over a 10% decline relative to the prior year and significantly contrasting the $5.1 trillion collected in 2024.
Some analysts suggest that recent operational changes and budgeting reductions, particularly those initiated by the Trump administration’s Department of Government Efficiency (DOGE) under Elon Musk, may have contributed to this decline.
Impact of Workforce Reductions at the IRS
As previously noted, budget cuts at the IRS have led to workforce reductions, which many believe affect the agency’s efficiency in processing returns and enforcing tax compliance.
The repercussions are significant, posing the risk of a half-billion-dollar reduction in tax revenues as some taxpayers take chances due to perceived weaknesses in the IRS’s audit functions.
Additionally, Republican legislators have discussed the potential elimination of the IRS, with alternative plans suggested for a new External Revenue Service (ERS) to replace current tax systems. This political landscape complicates the operations of the tax agency further.
Economic Challenges in 2025
Outside of IRS-specific issues, many Americans face severe economic pressures, including persistent inflation and stagnant wages.
For example, the price of essential goods, such as eggs, has surged to upwards of $10 per dozen in various regions. Factors like declining consumer confidence have arisen partly due to economic policies, including tariffs imposed by the Trump administration.
Experts caution that these tariffs may hinder economic growth and raise the risk of recession, contributing to consumer hesitance and reduced spending.
Simultaneously, many taxpayers find the tax filing process overwhelming due to its complexity. Concerns about potential delays in tax refunds, which many rely on for essential expenses, compound this anxiety. As of mid-March, the average IRS tax refund stands at $3,271.
Changing Perceptions of Audit Risks
The perceived reduction in the likelihood of IRS audits is prompting some taxpayers to feel emboldened to take greater risks in their returns. Among those surveyed, millennials reported the highest receptivity to the idea of not filing their taxes, influenced by doubts regarding the IRS’s capabilities.
This trend reflects a significant loss of confidence in the IRS’s enforcement capabilities, especially in light of the diminishing workforce and lack of Senate confirmation for a new commissioner.
Consequences of Not Filing Taxes
Despite the escalating uncertainties, most experts strongly advise against failing to file or pay taxes due to the associated repercussions.
Financial Penalties: The IRS can impose substantial penalties for failing to file or pay taxes, which accrue interest over time and may accumulate if a notice of intent to levy is issued.
Legal Risks: Evading taxes carries significant legal ramifications, including hefty fines, potential incarceration, and further penalties for discrepancies.
Enforcement Strategies: The IRS possesses a variety of methods for recovering unpaid taxes, including garnishing wages and bank levies, or even filing returns on behalf of non-filers, which typically result in higher tax liabilities.
Conclusion: Navigating the Tax Filing Landscape
In light of the challenges many taxpayers face, experts recommend exploring various avenues to manage tax obligations, such as payment plans or extensions. This proactive approach can mitigate the allure of avoiding the filing process altogether.
Moreover, taxpayers are reminded that despite fears of complications, the IRS utilizes automated systems to detect compliance issues. This implies that non-filing individuals could be significantly more susceptible to scrutiny.
For those feeling overwhelmed this tax season, seeking assistance from qualified tax advisors or financial planners may greatly simplify the process and ensure adherence to tax regulations.
Source
www.kiplinger.com