Amid staffing cuts, IRS sees overtime hours spike and digitization efforts ‘fall short’

The IRS is seeing an uptick in overtime hours, after shedding more than a quarter of its workforce last year.

The Treasury Inspector General for Tax Administration reports that regular work hours at the IRS decreased by 14% between 2024 and 2025. Last year, the IRS shed more than a quarter of its workforce largely through deferred resignation and early retirement offers.

During this same period, the agency saw a 12% increase in overtime hours. According to the TIGTA report, the IRS spent $27 million more on overtime in 2025 than in 2024.

Because of deep staffing cuts, the IRS is requiring employees in certain divisions to work mandatory weekend overtime hours to address backlogs.

Overtime pay at the IRS is generally paid out at 1.5 times an employee’s hourly pay rate. The agency can also grant compensatory time off to employees working overtime.

TIGTA found that frontline IRS employees working in Taxpayers Services accounted for 87% of overtime hours worked. Contract service representatives answering incoming calls and tax examiners processing returns worked most of these overtime hours.

TIGTA also flagged cases where employees worked “potentially unreasonable amounts of overtime hours.” The report found that about 300 IRS employees reported working more than 12 hours in a day, and 14 employees reported working more than 20 hours in a day.

TIGTA wrote that its auditors did not confirm whether these instances were intentional or accidental. However, the report determined that all of these outliers were “one-time occurrences.”

A collective bargaining agreement between the IRS and the National Treasury Employees Union prohibits bargaining unit employees from working longer than 12-hour days. But the IRS unilaterally rescinded that labor contract in February.

The IRS has not established any agency-wide limits on the number of overtime hours that can be worked for non-bargaining unit employees.

“According to the IRS, individual business units are allowed to consider overtime needs based on mission requirements, workload demands, funding availability, staffing considerations, and operational risk,” TIGTA wrote.

The IRS watchdog office reported in January that the agency’s inventory of tax returns awaiting processing increased by about 33% from December 2024 through December 2025 because of staff reductions and last year’s 43-day government shutdown.

TIGTA wrote that overtime can be an effective tool to address staffing shortages — but warned that excessive or prolonged use of overtime “can create a workforce dependent on overtime pay or negatively contribute to employee health, safety, and a reduced quality of work.”

In a separate report, TIGTA warned that staffing shortages have contributed to the IRS falling short of its long-term goal of digitizing a largely paper-based workload.

The IRS in August 2023 launched its Zero Paper Initiative to eliminate more than 200 million pieces of paper it processes annually. Under the Biden administration, the IRS purchased several high-volume scanners to scan and digitize paper correspondence from taxpayers and paper tax returns.

In February, TIGTA found that four contractors hired by the IRS to digitize paper tax returns scanned only about 5% of the IRS’ inventory of forms. Even if the IRS successfully outsourced this work, TIGTA wrote that the agency would still need to staff up its Submission Processing operations, which handles the processing of paper and electronic tax returns.

The IRS has spent $2.3 billion on contracts for the Zero Paper Initiative, and expects this project will allow for faster and more efficient processing. But in its latest report, TIGTA wrote that “we continue to have concerns about whether it can achieve a fully digital environment.”

“Since the ZPI is in its infancy, contractors have only scanned a limited volume of documents. In addition, there are several challenges the IRS needs to overcome, such as consistent long-term funding, readiness of contractors that can handle increased volumes, and staffing resources to balance workload demand until efficiencies can be gained. Without addressing these challenges, the IRS’s modernization efforts may fall short of expected results,” TIGTA wrote.

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