IRS staff cuts plus new tax laws aren’t exactly a ‘recipe for success,’ expert warns

The IRS is screeching toward the 2026 filing season with a gutted workforce and a host of new provisions from last year’s major tax bill to implement. Experts warn that the combination of these two things will create a challenging year for the agency and for organizations filing taxes.

“Taxpayers and tax pros alike, I think, need to anticipate some bumps in the road ahead,” Jessica Jeane, director of tax policy with Baker Tilly’s national tax practice, told CFO Brew.

“The IRS is entering this filing season under intense operational strain and there’s, rightfully so, shared concern among most in the tax world that the year of OB3 implementation…coinciding with the IRS’s significant workforce reduction isn’t exactly a recipe for success.”

It’s been a steady rollout…so far. Last year, lawmakers passed major legislation known as the “One Big, Beautiful Bill” (OB3), and it included more than 100 changes to US tax law, according to a recent report from the IRS Advisory Council. Those changes require the agency to issue guidance, train workers, and update its systems and processes to reflect all the tax code changes, the report continued.

Despite staff and budget challenges, plus a historically long government shutdown last year, the IRS “has done a great job with its initial rollout of OB3-related guidance,” Jeane said.

However, the rollout of such rules can take several steps. For example, the agency published a notice in August that it and the Department of the Treasury intended to “partially withdraw” proposed regulations regarding the Corporate Alternative Minimum Tax (CAMT), a product of the Biden-era Inflation and Reduction Act (IRA). The IRS then issued some temporary guidance in October.

In response to an inquiry about its plans to issue more OB3 guidance, the IRS referred CFO Brew to its priority guidance plan. The agency did not answer our questions about its training of workers on the new tax rules and whether it has a plan to maintain taxpayer service levels amid staff and budget cuts.

Jennifer Acuña, co-lead of the federal legislative and regulatory services group at KPMG’s Washington national tax practice, recommended that organizations plan for multiple tax scenarios while they await further OB3 guidance.

“It is particularly important for taxpayers to be able to pivot and quickly reassess their positions in light of newly released guidance,” she wrote to us via email in January. “Being nimble with the help of modeling is the name of the game.”

Simultaneous belt-tightening. The IRS is issuing guidance and training workers with a significantly smaller budget and workforce. The Trump administration’s so-called Department of Government Efficiency last year cut more than a quarter of the agency’s workforce, and over the last few years, lawmakers have clawed back more than half of the $80 billion in funding the IRS was slated to receive from the Biden-era Inflation Reduction Act (IRA).

The Treasury Inspector General for Tax Administration, an IRS watchdog, noted in a report in late September the agency was “beginning to see the effects of the workforce reduction on post filing season activities.”

“I do think it’s reasonable to expect that we’re likely to see longer hold times, strained communication, processing delays, and even errors, which, of course, will be a source of frustration,” Jeane said.