IRS Increases Overtime by $27M as Refund Fraud Surges, Watchdog Reports

(UNITED STATES) – The Treasury Inspector General for Tax Administration released a report on May 15, 2026, saying the IRS increased overtime spending by $27 million after staffing cuts reduced in-house capacity and left the agency more dependent on extra hours to handle its workload.

The report also said the IRS was not getting information early enough to stop some refund fraud before payments went out, linking the agency’s operational strain to a weakness in fraud prevention during the refund process.

Treasury Inspector General for Tax Administration, also known as TIGTA, described two pressures inside the tax agency at once: a heavier reliance on overtime after staffing reductions, and a lag in receiving information needed to block some improper refunds before the money left the door.

The findings point to a basic capacity problem. Staffing cuts reduced the IRS’s ability to handle work with its regular workforce, and more of that work moved into overtime.

TIGTA said the result was an increase of $27 million in overtime spending. The report tied that rise directly to cuts that reduced in-house capacity.

That sequence matters for the IRS because overtime spending and fraud controls sit on different sides of the agency’s job, but both depend on staffing, timing and internal systems. One finding focused on labor costs. The other focused on information arriving too late to stop some refund fraud before payments were issued.

The report was released in the middle of a period when the IRS continues to face scrutiny over how it allocates resources across tax administration, enforcement, customer service and fraud detection. TIGTA’s findings add a financial measure to that debate by putting a dollar figure on the agency’s increased overtime spending.

They also add a timing problem. If the IRS does not receive information early enough, refund fraud can move past the point where preventive action is still possible, forcing the agency to deal with payments after they have already gone out.

The report did not identify individual IRS or TIGTA officials by name, and it did not provide a breakdown of which functions or business units drove the overtime increase. TIGTA’s report focused on the overall increase and its cause: staffing cuts that reduced internal capacity.

No further dollar figures accompanied the finding on refund fraud. Still, the report’s wording drew a direct line between delayed information and the agency’s inability to stop some fraudulent refunds before payment.

That combination places two familiar issues, IRS operations and refund fraud, in the same frame. A tax agency working with less in-house capacity can shift more tasks into overtime, while delays in information can weaken the controls meant to catch fraudulent refund claims before funds are disbursed.

TIGTA’s findings also sharpen the oversight question around overtime spending. A rise of $27 million after staffing cuts suggests the savings expected from a smaller workforce can be offset, at least in part, by heavier use of overtime to complete the same work.

Inside the IRS, overtime often acts as a pressure valve during filing season and other high-volume periods. TIGTA’s report indicates that, after the staffing cuts, the agency relied on that pressure valve more heavily.

The report did not describe any immediate response by the IRS. It did, however, present a straightforward operational picture: fewer in-house staff, more overtime spending, and information arriving too late to stop some refund fraud before payments went out.

Those findings are likely to feed continued scrutiny of how the IRS matches staffing, technology and fraud screening against the volume and speed of refund processing. TIGTA’s report, released on May 15, 2026, put the cost of one side of that strain at $27 million.