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The head of the Treasury Department and a Department of Government Efficiency (DOGE) associate indicated the collaboration between the two agencies will proceed with a focus on systems upgrades paid for by spending cuts, but a court order temporarily bars the Trump administration from carrying out any further workforce reductions.

The Treasury Inspector General for Tax Administration reported that the IRS' workforce shrank 11%. This reflects the number employees who accepted the administration's voluntary resignation offer to step down from their posts in exchange for receiving normal pay and benefits through the remainder of the fiscal year ending September 30. It also incorporates probationary employees who received termination notices in February following the Office of Management and Budget's guidance on reductions in force (RIF).

An IRS memo dated April 15, 2025, detailed a Treasury Department Reduction in Force (RIF) plan that could lead to a 40% reduction in the IRS workforce.

Key details about this memo and the RIF plan:

Important Note: The current situation regarding this RIF is subject to ongoing legal proceedings. The judge's preliminary injunction temporarily halts the large-scale workforce reductions described in the memo.

The Treasury Inspector General for Tax Administration (TIGTA) has published the results of an audit initiated to determine whether the IRS timely and accurately processed individual paper and electronically filed tax returns during the 2024 Filing Season.

(Audit Report No. 2025-408-016) 📌

According to the audit, compared to the 2023 Filing Season, paper tax return volumes decreased by 11.4% and the number of e-filed returns increased by 1.9%.

Taxpayers continued to avail themselves of free tax filing options. Of some 137 million tax returns that were filed, 2.9 million (or 2.1%) were submitted via the IRS' Free File Program. As of the end of April 2024, about 140,000 tax returns were transmitted through the IRS' Direct File system.

In a positive vein, TIGTA highlighted that the IRS' fraud detection processes "continue to prevent the issuance of a significant amount of fraudulent refunds." About $6.5 billion was claimed in fraudulent refunds but 98.5% of fraudulent refunds were prevented, the audit noted.

The Office of Professional Responsibility (OPR) is responsible for matters related to the regulation of tax professionals and other individuals’ practice before the IRS under § 330 of Title 31 of the U.S. Code and 31 Code of Fed’l Regulations (CFR) Subtitle A, Part 10, complied in Circular 230, 📌 Regulations Governing Practice before the Internal Revenue Service.

The OPR also has exclusive responsibility for discipline imposed on “practitioners” (as well as appraisers and firms or other entities that conduct a tax practice subject to the regulations). The office’s jurisdiction encompasses instituting disciplinary proceedings and pursuing sanctions (censures, suspensions or disbarments from practice, monetary penalties, and appraiser disqualifications).

Although the OPR operates pursuant to a statute in Title 31 (USC) and regulations promulgated thereunder, instead of Title 26 (the Internal Revenue Code (IRC)) and its regulations and acts generally independently from the IRS’s tax compliance and collection functions, the OPR is, of course, still an IRS business unit and a part of Treasury Department. As such, the OPR is subject to § 6013, Confidentiality and Disclosure of Returns and Return Information, and not only must OPR adhere to the section’s provisions but also apply them in carrying out our casework, as needed.

Additionally, in performing the office’s core responsibilities described above (handling oversight and disciplinary matters related to practice), OPR works with other IRS business units to safeguard confidential taxpayer information from unauthorized disclosure. The OPR’s case files include federal tax information (FTI) of or pertaining to practitioners who’ve been referred to the OPR for possible misconduct and the FTI of third parties.

When the OPR opens a case upon receipt of an actionable referral to investigate or inquire into the allegations that were reported, the office conducts research, case and development, and analysis. Upon determining to continue with the case, OPR notifies the affected practitioner in writing of the referral and the open case and solicits a response from the practitioner. The letter also informs the practitioner of the opportunity to request, themselves or through their authorized representative(s), underlying documents and other information in the case file. Practitioners and their representatives can obtain copies of non-privileged and otherwise releasable material from the files.

To exercise this opportunity, the OPR created and makes available a standard section 6103 information request letter 📌 for practitioners and their representatives to use to request FTI maintained in the OPRs case files.

The § 6103 information-request letter enables access to tax returns and related tax information. A practitioner or representative can use the letter for copies of:

The § 6103 letter is based on certain provisions of the statute, which vary in their coverage:

It is important to note that any information disclosed under § 6103(l)(4) is “solely for use in, or in preparation for, the action or proceeding.” Any other use or disclosure of the third-party tax data is prohibited. A practitioner or representative who makes an unauthorized disclosure is subject to potential civil and criminal liability. The section 6103 information-request letter includes acknowledgments by the requester(s) of the disclosure restrictions and potential penalties for violations.

The § 6103 information-request letter is distinct from a Freedom of Information Act (FOIA) request. The letter generally will be an easier and quicker way to obtain the information sought and will most often result in greater release of information than a FOIA request.

The OPR receives and directly handles § 6103 requests, whereas FOIA requests are received and processed, on a first-in, first-out basis, by Privacy, Governmental Liaison and Disclosure within the IRS, which must coordinate with the OPR on the identification (search for), potential redaction, and release of responsive records.

In addition, a § 6103 request is not subject to fees for search and review time or for photocopying that apply to FOIA requests. The most significant difference is that the IRS will not release any third-party tax information in response to a FOIA request. That holds true regardless of the relevance and materiality of the information to a pending or prospective action or proceeding that could affect the rights of the practitioner making the request or on whose behalf the request is made. The third-party tax information is required to be withheld under FOIA Exemption 3 (5 USC 552(b)(3)), in conjunction with § 6103.

Thus, a practitioner or representative’s submission of a FOIA request may be a waste of time and resources, to the extent it is necessary to submit a subsequent § 6103(l)(4)(A) request to obtain all available information relevant to the case. Finally, practitioners should be aware that a § 6103 request submitted to the OPR will only yield responsive records held by the OPR itself, not records maintained in files elsewhere in the IRS.

1. Credit Suisse Services AG Pleads Guilty to Tax Crimes, Signs a Separate Non-Prosecution Agreement Related to Conduct in Singapore, and Agrees to Pay More Than $510M

Credit Suisse Services AG pleaded guilty and was sentenced to conspiring to hide more than $4 billion from the IRS in at least 475 offshore accounts. The guilty plea by the Swiss corporation is the result of a years-long investigation by U.S. law enforcement to uncover financial fraud and abuse.

In addition to the plea, Credit Suisse Services AG entered into a non-prosecution agreement (NPA) with the Justice Department’s Tax Division and U.S. Attorney’s Office for the Eastern District of Virginia in connection with U.S. Accounts booked at Credit Suisse AG Singapore. Under the NPA, Credit Suisse Services AG agreed to cooperate with the Justice Department in ongoing investigations and to pay significant monetary penalties for maintaining accounts in Singapore on behalf of U.S. taxpayers who were using offshore accounts to evade U.S. taxes and reporting requirements.

According to the Plea Agreement, NPA, and documents filed in court : from Jan. 1, 2010, and continuing until about July 2021, Credit Suisse AG, which had ultra-high-net-worth and high-net-worth individual clients around the globe, conspired with employees, U.S. customers, and others to willfully aid U.S. customers in concealing their ownership and control of assets and funds held at the bank. This enabled those U.S. customers to evade their U.S. tax obligations in several ways, including by opening and maintaining undeclared offshore accounts for U.S. taxpayers at Credit Suisse AG, and providing a variety of offshore private banking services that assisted U.S. taxpayers in the concealment of their assets and income from the IRS and allowed for their continued failure to file FBARs.

Among other fraudulent acts, bankers at Credit Suisse falsified records, processed fictitious donation paperwork, and serviced more than $1 billion in accounts without documentation of tax compliance. In doing so, Credit Suisse AG committed new crimes and breached its May 2014 plea agreement with the United States.

Between 2014 and June 2023, Credit Suisse AG Singapore held undeclared accounts for U.S. persons, which Credit Suisse AG Singapore knew or should have known were U.S., with total assets valued at over $2 billion.

Credit Suisse AG Singapore failed to adequately identify the true beneficial owners of accounts and failed to conduct adequate inquiry about U.S. indicia in the accounts. In 2023, during the post-merger of UBS AG Singapore and Credit Suisse AG Singapore, UBS became aware of accounts held at Credit Suisse AG Singapore that appeared to be undeclared U.S. accounts. UBS froze some of the accounts, voluntarily disclosed information about those identified accounts to the Justice Department and cooperated by undertaking an investigation into the identified accounts.

2. California Executives Plead Guilty to Employment Tax Crimes

Two California men pleaded guilty to not paying over employment taxes to the IRS.

The following is according to court documents and statements made in court: Lalo Valdez and Matthew Olson, both of Northern California, operated a San Jose-based health informatics and product development company that provided clinical care and technology services to clients in healthcare and academia. Valdez was the CEO and Olson the CFO. As such, both were responsible for the company’s operations, managed its internal books and records, signed checks on behalf of the company, and hired and fired employees. Both men also were responsible for withholding Social Security, Medicare, and federal income taxes from employees’ wages and paying those funds over to the government each quarter.

For every calendar quarter from the first quarter of 2017 through the second quarter of 2021, Valdez and Olson withheld these taxes from employees’ wages but did not pay them over to the IRS or report them on quarterly tax forms. Instead of paying over the taxes, Valdez and Olson used the company’s money to pay for country club memberships and season tickets to the San Jose Sharks of the National Hockey League.

During this same period, Olson also was one of the owners and operators of a day spa located in Saratoga, California. There, Olson was responsible for collecting and paying Social Security, Medicare, and income taxes to the IRS. From the second quarter of 2017 through the fourth quarter of 2020, however, Olson collected but did not pay them over to the IRS or report them on quarterly tax forms.

In total, Olson caused a tax loss to the IRS exceeding $2.1 million.

Valdez caused a total tax loss to the IRS of nearly $1.5 million.

Valdez and Olson are scheduled to be sentenced on Oct. 20. Both men face a maximum penalty of five years in prison as well as a period of supervised release, restitution, and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

3. Hawaii woman pleads guilty to mail fraud and tax fraud

A Hawaii woman pleaded guilty to defrauding her mortgage lender and conspiring to defraud the IRS by fraudulently obtaining a tax refund and then thwarting the IRS’ efforts to recoup it.

The following is according to court documents and statements made in court: Hannah Heart, of Honolulu, conspired with others to file a false 2014 individual income tax return in her name. As part of the conspiracy, Heart’s co-conspirators created a fake tax form purportedly issued by a mortgage lender to Heart, which she attached to her return. The form falsely reported that Heart had received income from a financial institution of more than $2.4 million, from which over $1.2 million in taxes had been withheld. As a result, Heart filed a tax return that falsely claimed she was entitled to a $464,904 refund, which the IRS paid.

When the IRS began trying to collect the fraudulent refund from Heart, she took several steps to thwart the IRS. For example, Heart deposited the refund check into a trust bank account and immediately transferred most of the balance to a separate bank account, both of which she controlled. She also sent numerous false, fraudulent, and frivolous letters to the IRS in response to IRS communications.

In addition, Heart helped another co-conspirator defraud the IRS using the same scheme. Heart and her co-conspirator deposited a second fraudulently obtained $1 million refund check from the IRS, payable to the co-conspirator.

In total, Heart caused a tax loss to the IRS of $1,618,985.54.

Heart also defrauded her mortgage lender, conspiring with others to do so. Heart took out a mortgage for her home in 2006 and stopped making payments in 2010 toward her mortgage. The mortgage lender-initiated foreclosure proceedings in 2022 against Heart. In response, a co-conspirator sent the lender a fictitious document purporting to be a check for the full amount due to Heart’s mortgage. The lender initially accepted the check but later rejected it as fraudulent. Afterwards, Heart sent mail to the lender demanding that it accept the fraudulent check as full payment of her remaining balance.

In total, Heart intended to defraud the mortgage lender of $2,066,522.22.

Heart will be sentenced at a later date. She faces a maximum penalty of 20 years in prison on the charge of mail fraud and a maximum penalty of five years in prison for the charge of conspiracy to defraud the IRS. She also faces a period of supervised release, restitution, and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

4. Virginia Attorney Pleads Guilty to Filing False Tax Return

A Virginia attorney pleaded guilty to filing a false tax return that concealed a significant portion of his income.

According to court documents and statements made in court: Asim Ghafoor, of Ashburn, was an attorney who operated a law practice in Virginia. His law practice had clients in various states, including Michigan. Ghafoor reported income from his practice on individual income tax returns that he personally prepared and signed. For 2012 through 2016, Ghafoor prepared and filed false tax returns that underreported the income he earned from his business.

In total, Ghafoor caused a tax loss to the IRS of $354,634.

He faces a maximum penalty of three years in prison for filing a false tax return. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

5. Former Defense Contractor Pleads Guilty to Tax Crimes

Defendant Admits Concealing 50% Ownership of $7B Defense Contracting Business to Evade Taxes

A former defense contractor pleaded guilty to tax crimes related to his scheme to defraud the United States and evade taxes on income that he earned from his contracts with the U.S. Department of Defense.

The following is according to court documents and statements made in court: Douglas Edelman founded and owned 50% of Mina Corp. and Red Star Enterprises (Mina/Red Star), a defense contracting business that received more than $7 billion from contracts with the U.S. Department of Defense to provide jet fuel in the United States’ post-9/11 military efforts in Afghanistan and the Middle East.

Working with others, Edelman engaged in a lengthy scheme to hide his Mina/Red Star profits to evade U.S. taxes, including by concealing his income in undisclosed foreign bank accounts, creating false documents and making false statements that one of his co-conspirators — a French citizen residing abroad and without U.S. tax obligations — founded and owned Mina/Red Star.

For example, when the company became profitable in 2005, Edelman began taking distributions which he deposited into Swiss bank accounts, primarily at Credit Suisse, in the name of other companies he owned. In 2008, Credit Suisse informed Edelman that he had to either close his accounts or disclose them to U.S. authorities. Rather than come into compliance with his tax and reporting obligations, Edelman closed his accounts and opened new ones at Bank Julius Baer in Singapore in the name of a nominee entity, the beneficiaries of which were purportedly Edelman’s daughters. He then directed the subject income he earned from Mina/Red Star to those bank accounts.

In 2010 the U.S. House of Representatives Committee on Oversight and Government Reform’s Subcommittee on National Security and Foreign Affairs began investigating allegations of corruption in connection with Mina/Red Star’s contracts with the Department of Defense. As part of this inquiry, the subcommittee became interested in the identity of Mina/Red Star’s owners. At this time, Edelman had not filed U.S. tax returns to report the millions of dollars he had earned from Mina/Red Star and had not paid U.S. taxes on his income.

Rather than disclose his ownership, Edelman caused his attorneys to tell Congress a false story that a French co-conspirator who had no U.S. tax or reporting obligations founded and co-owed Mina/Red Star with another individual. To corroborate the false story, Edelman and a co-conspirator caused false and backdated paperwork to be created.

To continue the scheme, Edelman conveyed the false story about Mina/Red Star’s ownership to other arms of the U.S. government, including to the Department of Defense during contract negotiations in 2010 and 2011, to the IRS in a 2016 application to the Offshore Voluntary Disclosure Program, and to the Justice Department in a 2018 presentation.

In conjunction with his 2016 application to the IRS’s Voluntary Disclosure Program, Edelman filed false tax returns for several prior years that only reported income from gifts or purported consulting payments, continuing to conceal the millions he had earned from his company. On the returns, he also concealed profits he had earned from a separate business to provide internet service to members of the armed forces at Kandahar Air Base in Afghanistan.

Instead of paying the taxes that he knew he owed, Edelman used the money to fund his lifestyle and additional investments. He invested in a music television franchise in Eastern Europe, a land venture in Tulum, Mexico, and a farm in Kenya, and purchased property around Europe, including a home in Ibiza, Spain, and a townhouse in London.

Edelman faces a maximum penalty of five years in prison for each count on which he has pleaded. He also faces a period of supervised release, restitution, and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The Government of the Kingdom of Spain arrested and extradited Edelman to the United States. The Justice Department’s Office of International Affairs also provided substantial assistance in securing Edelman’s arrest and extradition and assisted with securing evidence from abroad, including through mutual legal assistance requests.

Congratulations to the Los Angeles Field Office for earning the May Tax Case of the Month.

Luis E. Perez was sentenced to 96 months in federal prison and ordered to pay $38,052,767 in restitution to the IRS following a $60 million tax scheme. Perez willfully evaded nearly $30 million in personal taxes and filed a false return to conceal an additional $30 million in liabilities owed by his staffing companies.

Instead of remitting payroll taxes withheld from employee wages, Perez diverted funds for personal gain—purchasing high-end luxury items including a Ferrari 360 Spider F, Rolls-Royce Phantom, Mercedes-Benz SLS and G-Class, Lamborghini Aventador, and a Duffy Bay Island boat. He attempted to obscure ownership by titling the assets under various businesses and associates.

Additionally, he used a Visa Black card obtained under another person’s name (now his wife) to make personal purchases, paying off the charges with business funds.

United States Attorney David Metcalf announced that Tauheed Tucker, 23, of Philadelphia, Pennsylvania, Cory Scott, 25, of Ardmore, Pa., and Alexander Telewoda, 25, of Clifton Heights, Pa., were arrested and charged by superseding indictment with conspiracy to steal government funds, theft of government funds, and mail theft, arising from a multimillion-dollar scheme to steal U.S. Treasury checks from a local U.S. Postal Service (“USPS”) facility and then resell those checks to purchasers around the country.

A fourth defendant, Saahir Irby, 27, of Philadelphia, was also charged with these offenses, in addition to a previously charged count of mail theft.

The superseding indictment alleges that, between June 2023 and September 2024, Irby and Tucker, while working as USPS mail processing clerks, stole thousands of envelopes containing U.S. Treasury checks from mail sorting machines at the USPS Philadelphia Processing and Distribution Center.

According to the indictment, Irby and Tucker removed the checks from the USPS facility and sold them to defendants Scott and Telewoda, who then advertised the stolen checks for resale on the cloud-based instant messaging application Telegram. Upon receiving payment from interested buyers, Scott and Telewoda mailed the stolen Treasury checks to buyers around the country who attempted to cash the checks, without the knowledge or permission of the individuals to whom the checks had originally been issued.

Over the course of the scheme, the indictment alleges Irby and Tucker sold Scott and Telewoda thousands of stolen Treasury checks whose face value exceeded $80 million. Scott’s and Telewoda’s customers successfully negotiated approximately $11 million worth of these stolen Treasury checks at financial institutions. Irby is also charged with a separate instance of mail theft involving another batch of Treasury checks that he allegedly stole and sold to an unnamed individual in August 2024.

If convicted, Irby faces a maximum possible sentence of 25 years’ imprisonment, three years of supervised release, and a $1,000,000 fine, and Tucker, Scott, and Telewoda each face a maximum possible sentence of 20 years’ imprisonment, three years of supervised release, and a $750,000 fine.

The IRS is aware of a delay in processing some electronic payments 📌 and that some taxpayers are receiving IRS notices indicating a balance due even though payments were made timely.

Taxpayers who paid tax reported due on their tax return electronically may see payments on their accounts as pending, although the IRS has received payment through their banking institution. The notice may have been initiated before the payment was processed on the account, or the payment may have been processed but contained errors and requires additional handling to address the error before updating the tax account.

For affected taxpayers, the IRS apologizes for the inconvenience this delay in processing your payment has caused.

Ways and Means Committee Chairman Jason Smith (MO-08) released the following statement on the 2025 Social Security and Medicare Trustees Reports:

“This week’s report makes clear how much we need pro-growth tax and economic policies that unleash our nation’s growth, increase wages, and create new jobs to help strengthen these Trust Funds for those who rely on them and to protect them for generations to come. The One, Big, Beautiful Bill would do just that and also provide much-needed additional relief to America’s seniors who struggled for four years in the Biden economy.

Key Findings and Projections:

Security:

Medicare:

Exempt Organizations and Government Entities have published three new Technical Guides (TGs). These guides are comprehensive, issue-specific documents that update and combine the Audit Technique Guides (ATGs) 📌 with other technical content. Once completed, the TGs replace corresponding ATGs.

The new TGs are:

TG 3-8 addresses the concepts of inurement and private benefit pertaining to Section 501(c)(3) organizations. Organizations exempt under Section 501(c)(3) of the Internal Revenue Code (Code) must avoid engaging in impermissible conduct, including that which results in private benefit and inurement. An otherwise qualifying organization will be disqualified for exemption if it benefits private interests, either through inurement of its net earnings to certain “insiders,” or by primarily benefiting the interests of persons who, though not “insiders,” do not comprise a charitable class.

TG 3-27 addresses the following public charity foundation classifications:

TG 70 addresses technical information and examination techniques regarding non-exempt charitable trusts (NECTs) and split-interest trusts. These trusts are subject to certain excise taxes under Chapters 41 and 42 pursuant to Section 4947. To provide context for the discussion of NECTs and split-interest trusts, this TG also provides an overview of trusts in general, Section 4947, and the common characteristics and different varieties of NECTs and split-interest trusts. It also discusses issues that may arise for trusts described in Sections 4947(a)(1) and (a)(2).

Summertime is a common time for wedding bells to ring, and newlyweds can make their tax filing easier by doing a few things now. A taxpayer's marital status as of December 31 determines their tax filing options for the entire year, but that's not all newlyweds need to know.

Report a name change

Report any name changes to the Social Security Administration. The name on a person's tax return must match what’s on file at the SSA. Otherwise, it could delay any tax refund. Taxpayers should file Form SS-5, Application for a Social Security Card 📌 with their updated information. It’s available on SSA.gov, by phone at 800-772-1213 or at a local SSA office.

Update address

Notify their local post office, employers and the IRS of any address change. To officially change their mailing address with the IRS, taxpayers must compete and submit Form 8822, Change of Address. 📌 See page 2 of the form for detailed instructions.

Check withholding

Newly married couples must give their employers a new Form W4, Employee's Withholding Certificate, 📌 within 10 days. If both people work, this could move them into a higher tax bracket or be affected by the additional Medicare Tax. 📌 The Tax Withholding Calculator 📌 on IRS.gov can be used to check withholding and provide tips for completing a new Form W-4.

Review filing status

Married people can choose to file their federal income taxes jointly or separately. While filing jointly is usually more beneficial, it's best to figure the tax both ways to find out which makes the most sense.

On March 10, 2022, the Department of Labor (the Department) issued Compliance Assistance Release No. 2022-01 (the 2022 release) regarding 401(k) plan investments in cryptocurrencies.

The current release memorializes the Department's decision to rescind the guidance in full.

The 2022 release directed plan fiduciaries to exercise "extreme care before they consider adding a cryptocurrency option to a 401(k) plan's investment menu for plan participants." The standard of "extreme care" is not found in the Employee Retirement Income Security Act (ERISA) and differs from ordinary fiduciary principles thereunder.

Prior to the 2022 release, the Department had usually articulated a neutral approach to particular investment types and strategies. Today's release restores the Department's historical approach by neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan's investment menu is appropriate. When evaluating any particular investment type, a plan fiduciary's decision should consider all relevant facts and circumstances and will "necessarily be context specific."

In FY 2023, cases worked by TAS generally met its acceptance criteria and taxpayers’ issues were fully addressed. However, we found TAS case advocates did not timely contact taxpayers or their representatives in 103 (63 %) of the 163 closed cases we sampled. The initial and subsequent contact delays for these cases totaled an average of 146 calendar days late.

When TAS case advocates do not have the authority to take the actions necessary to resolve taxpayer issues, they use Form 12412, Operations Assistance Request (OAR), to request or recommend actions from an IRS function. We reviewed 104 closed cases from FY 2023 and found that in 23 (22 %) of them, TAS case advocates did not timely send an OAR, or the responding IRS function did not timely complete the OAR.

The remaining 81 OARs were processed timely. The National Taxpayer Advocate has stated that TAS case advocacy is facing three challenges:

In October 2024, TAS issued interim guidance that modified procedures for working certain systemic burden cases by grouping taxpayers with similar issues. TAS management estimates that this has reduced new receipts by 30 %, which equates to approximately 65,000 cases that will not be assigned to a case advocate.

In addition, TAS is planning to deploy a new case and systemic issue management system in October 2025 that management believes will be essential to providing quality taxpayer service and enhancing employee efficiency. However, management also stated that the capability for taxpayers to interface with the system will not be available in the initial release.

TIGTA recommended that the National Taxpayer Advocate:

The IRS agreed with two recommendations and partially agreed with the third, stating that its new customer relationship management system will have a dashboard enabling case advocates and managers to monitor the status of OARs more effectively. TAS plans to assess the resources needed to add automated notification functionality in a future release.

National Taxpayer Advocate Erin M. Collins released her Fiscal Year 2026 Objections Report to Congress, 📌 highlighting a largely successful 2025 filing season while raising concerns about persistent refund delays for victims of identity theft, delays in processing Employee Retention Credit claims, and critical challenges facing taxpayers and the IRS as the agency prepares for the 2026 filing season. The report also outlines the Advocate’s priority recommendations as the IRS continues to modernize its technology systems.

The IRS received nearly 141 million individual income tax returns and processed about 138 million. Over 95% of processed returns were filed electronically, and about 62% resulted in refunds. Figure 1 shows key filing season statistics.

The IRS processed most returns without issues. However, the IRS “suspended” over 13 million returns during processing pending additional review, and these processing delays generally translated into refund delays for the affected taxpayers.

Refund delays for identity theft victims remain a serious concern.

One longstanding filing season challenge that remains unresolved is lengthy delays in resolving identity theft cases. There are two categories of identity theft cases. One involves returns that IRS return processing filters flag as potential identity theft; the IRS flagged about 2.1 million such returns. In these cases, the IRS sent a letter to taxpayers notifying them they had to authenticate their identities before receiving their refunds. The IRS typically takes several months to resolve these cases.

In the second category of identity theft cases, a thief has stolen a taxpayer’s identity and filed a tax return using the taxpayer’s name and Social Security number. These taxpayers are victims and may also be experiencing the effects of identity theft beyond the context of their tax returns. Their cases are referred to the IRS’s Identity Theft Victim Assistance (IDTVA) unit for resolution.

As of the end of the filing season, the IRS had about:

Operational risks remain a concern as the 2026 filing season approaches

Collins warned that without improved technology in place, IRS staffing cuts could jeopardize the success of next year’s filing season. To deliver a successful filing season, the IRS needs a sufficient number of trained employees to program its processing systems, develop and disseminate timely and clear guidance on tax law changes, answer telephone calls and process correspondence, among other things. See Figure 2 for staffing reductions by business unit.

Between the start of the 2025 filing season and June, the IRS workforce decreased from about 102,000 employees to fewer than 76,000, a drop of about 26% (after taking into account employees who accepted an early resignation offer but will remain on rolls through September 30).

The report notes that the IRS’s Information Technology (IT) and Taxpayer Services business units play critical roles in delivering a successful filing season. IT personnel must reprogram IRS processing systems to reflect changes in law, while Taxpayer Services personnel are responsible for processing tax returns, answering telephone calls, and processing correspondence.

As of this month, as Figure 2 shows, IT staffing has been reduced by 27%, and Taxpayer Services staffing has been reduced by about 22%, or by more than 9,000 employees. The Administration’s FY 2026 budget proposal calls for keeping Taxpayer Services staffing at about FY 2025 levels (taking into account both appropriated funds and Inflation Reduction Act funds). Thus, the IRS will need to rapidly hire and train thousands of new Taxpayer Services employees before the 2026 filing season to process returns and deliver timely refunds.

IRS should prioritize three taxpayer-focused IT projects

The report applauds recent progress in IRS technology modernization but urges the agency to stay focused on taxpayer-facing improvements. Collins highlights the IRS’s longstanding challenges in managing antiquated technology systems and recent efforts to modernize its systems. In collaboration with the Treasury Department and the Department of Government Efficiency, the IRS established nine distinct modernization “verticals” (i.e., technology projects designed to meet specific needs). Among them are a unified application programming interface, digitalization of paper returns and correspondence, and improved system interoperability among the agency’s roughly 60 stand-alone case management systems.

The report recommends that the IRS adopt a “digital first” approach to taxpayer service and prioritize three projects:

1. Creating fully functional online accounts. Collins said the IRS’s number one priority should be to enhance online accounts so taxpayers and tax professionals can view all relevant information and conduct all transactions with the IRS through their accounts.

By contrast, the functionality of IRS online accounts is limited. Taxpayers generally cannot file tax returns, view most notices, or respond to notices through their online accounts. Until recently, they could not make payments. As a result, only about 10% of taxpayers have taken the time to establish online accounts.

2. Digitizing the processing of paper-filed tax returns, correspondence, and other documents. The IRS estimates it will receive about 43 million paper tax returns and 19 million paper information returns in 2025, as well as millions of responses to the roughly 170 million paper notices it sends to individual taxpayers each year.

IRS employees manually transcribe data from paper-filed tax returns, digit by digit, into IRS systems. The IRS has allowed taxpayers to upload their responses to IRS notices through a digital “Document Upload Tool,” but it does not have a way to process responses using automation. As a result, it generally must print taxpayer responses and route them to IRS employees for processing as if they had been submitted on paper.

3. Integrating about 60 case management systems. The report says the IRS currently stores taxpayer data on about 60 distinct case management systems that generally cannot communicate with each other. As a result, a taxpayer who calls the IRS to discuss an account issue may find the customer service representative (CSR) who answers lacks access to the relevant account information or must open multiple case management systems on different screens and toggle among them to answer questions.

Taxpayer Advocate Service advocacy objectives for FY 2026

The report identifies TAS’s key advocacy objectives for the upcoming fiscal year as law requires. The report sets out nine such objectives:

Read the IRS responses in the 2024 Annual Report to Congress Report Card (PDF) 📌

Executive Summary

This report to the IRS and Congress by members of the IRS Electronic Tax Administration Advisory Committee

(ETAAC) presents a robust list of recommendations for improving U.S. tax administration at the federal level in an era of rapidly changing technology and evolving taxpayer needs. At the heart of these recommendations is the joint perspective and alignment of tax practitioners, enrolled agents, state and local tax administrators, and other respected experts from across the tax ecosystem. Members’ real‐world insights underpin this report’s initiatives, ensuring that recommendations are responsive to tax ecosystem stakeholders, taxpayer challenges and the operational realities of the Internal Revenue Service.

Key themes in the report include:

Relying on extensive IRS briefings, the ETAAC members unanimously support collaboration between Congress and the IRS surrounding any tax legislation so that changes may be managed to minimize taxpayer confusion and reduce administrative burdens on the entire tax ecosystem, including state and local tax administrators, enrolled agents and other practitioners, and the tax software providers that support electronic submission of data to the IRS. Recommendations include streamlining statutory provisions and eliminating redundant filings, thereby empowering taxpayers to comply more readily and enabling the IRS to reallocate resources to enhance service quality.

ETAAC members unanimously agree that predictable, multi-year funding is vital for maintaining efficient taxpayer services. This report reinforces the need to support critical technological and operational advancements.

Modernization efforts, including master file enhancements, systemic technology upgrades, and process improvements - are included in this report as essential investments that not only reduce inefficiencies but also bolster public trust in the IRS.

The report identifies critical barriers - especially for second filers on joint returns and first-time filers - in using current IRS digital payment platforms. Based on thorough discussions during IRS briefings, ETAAC members concur that adopting user - centered digital solutions can eliminate these challenges. Proposals include updating Direct Pay methodologies, improving online account options, and instituting safeguards to protect low-income taxpayers from undue fees, ensuring every taxpayer can easily meet their obligations.

Recognizing the potential harm posed by unregulated tax preparers, the ETAAC unanimously recommends that Congress empower the IRS with clear statutory authority to regulate non-credentialed preparers. This measure is intended to raise the quality of tax returns, reduce fraudulent practices, and enhance overall taxpayer protection— benefits that extend to the entire tax ecosystem.

Emphasizing a core principle - “building with taxpayers, not for taxpayers” - the report underscores the transformational potential of integrating human-centered design into IRS digital services. Unanimously agreed upon by committee members, further recommendations advocate for iterative user testing and the strategic deployment of artificial intelligence to create a more transparent, efficient, and responsive tax administration process. These technological enhancements are aimed at reducing delays, minimizing errors, and ultimately strengthening taxpayer confidence while maintaining service levels and strict data security and privacy standards.

In summary, the 14 recommendations detailed in this report reflect the perspectives and extensive experience of the members of the 2024-25 ETAAC committee, informed by information provided by the IRS in numerous briefings, and crafted to provide actionable solutions for implementation and improvement. The unanimous consensus of ETAAC members is a critical element of this report, allowing the IRS and Congress to trust that these recommendations have been vetted with a robust collection of stakeholder viewpoints. By pursuing these recommendations, both the IRS and Congress can take definitive steps toward continuing modernization of our nation’s tax system, protecting taxpayer rights, and securing the integrity of revenue collection for the federal government.

Publication 3415 (Rev. 6-2025) 📌

Rate Under Section 7520 for July 2025 Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 5.00%

Blended Annual Rate for 2025 Section 7872(e)(2) blended annual rate for 2025 4.22%