Tax professionals are bracing for significant operational challenges as the Internal Revenue Service grapples with a devastating 25% reduction in its workforce and impending budget cuts that threaten to fundamentally reshape how practitioners interact with the agency.
Between January and May 2025, the IRS workforce plummeted from approximately 103,000 employees to just 77,000, according to a new report from the Treasury Inspector General for Tax Administration. The departures, driven by a Deferred Resignation Program and other incentive offers, affected employees at all experience levels across every function of the agency. For tax practitioners, this mass exodus translates into longer wait times, reduced technical support, and fewer experienced IRS personnel available to resolve complex client issues.
The staffing crisis is compounded by proposed fiscal year 2026 budgets that would slash the agency's annual funding by roughly 20%. While the Inflation Reduction Act originally allocated nearly $80 billion in supplemental funding over ten years, Congress subsequently reduced that figure to $37.6 billion. As of March 2025, the IRS had already spent $13.8 billion of those funds, leaving limited resources for the modernization projects and operational improvements that practitioners have long awaited.
Particularly concerning for tax professionals is the 25% reduction in IT staff and the 18% cut to the Return Integrity and Compliance Services function. TIGTA estimates these reductions could allow nearly $360 million in fraudulent refunds to slip through during the next filing season, potentially exposing practitioners and their clients to increased scrutiny and enforcement actions as the IRS struggles to distinguish legitimate returns from fraudulent ones.
The operational landscape is becoming more complicated as well. Starting October 1, 2025, the IRS began phasing out paper checks for refunds under a presidential executive order. With more than 6 million taxpayers receiving paper check refunds during the 2025 filing season, practitioners now face the added responsibility of educating clients, particularly those without bank accounts, about alternative electronic payment options.
Perhaps the most significant challenge comes from the passage of the One Big Beautiful Bill Act in July. The legislation requires extensive updates to IRS computer programming, revisions to tax forms and instructions, and changes to enforcement strategies. For practitioners, this means navigating uncertain guidance while managing client expectations amid potential processing delays, account inaccuracies, and incorrect notices that may result from system errors.
TIGTA's report also raises questions about the future of the IRS's Direct File program, noting that the agency is being evaluated on whether it met legislative requirements for potential termination of the free filing tool.
Combined with recent government shutdowns that triggered extensive IRS furloughs, tax practitioners face an unprecedented environment where reduced agency capacity meets increased complexity, requiring them to serve as both technical experts and client advocates while managing significantly diminished support from the IRS itself.
Practitioners should start now considering how to address the challenges that will inevitably arise during the busy season. If you haven’t already listened to our last Tax App Academy, gaining important efficiencies for tax season processes, as well as heightened cybersecurity, is critical. View all our pre-tax season prep content on our YouTube channel.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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