A panel of former top IRS and Justice Department officials at the D.C. Bar Tax Conference January 7 warned of a challenging filing season, citing workforce reductions and recent disruptions, but expressed optimism that technology and new leadership could chart a path forward.
Major Tax Season Challenges Expected
The upcoming filing season is expected to be particularly challenging, according to the panel. Moderator Fred Goldberg, also a former IRS Commissioner, noted the IRS processes over 160 million individual returns annually.
John Koskinen, who served as commissioner from 2013-2014 praised the agency’s dedicated workforce but noted that disruptions from a recent government shutdown and the complexity of implementing new tax legislation have created an extraordinarily difficult environment.
Much of the headwind, the panelists agreed, comes from the rapid reduction in the agency’s workforce. “If you take 25% of the workforce away in a relatively short period of time, that just increases the challenge,” Koskinen said, noting that while the IRS had lost employees during his tenure, it was a gradual attrition that could be planned for.
He stressed that any service issues would not be because of “a lack of effort or concentration by the employees.”
Danny Werfel, who stepped down from the commissioner post last January, described the direct link between staffing and service as “largely formulaic.” He explained that “you can model out inputs and outputs. So if we have a certain amount of people on the floor at the call center, that will model towards a certain level of service.”
Werfel warned that with fewer employees, the IRS will inevitably serve fewer taxpayers, a problem that existed even at peak staffing levels. He recalled opening walk-in centers on a Saturday only to have a massive supply-and-demand mismatch. “We had 1,500 people online by 5 a.m. in many locations,” he said, meaning “that 1,200 people who needed to see the IRS two days before filing season got turned away hours before we opened.”
Viability of Technology
Despite the staffing shortfalls, the panelists saw technology as the critical path forward for the IRS. Werfel argued that emerging tools are the key to overcoming the agency’s traditional limitations. “The way to break the logjam is technology,” he said. “That is the game changer, especially AI, automation, robotics, machine learning — all of that can render those old formulas gone.” He added that he was encouraged by signs that the IRS is now more willing to take risks and move faster to adopt new tools than in the past.
Doug O’Donnell, who has served as acting commissioner and deputy commissioner, agreed, suggesting technology could be used to fundamentally rethink how the agency performs its work. He pointed to correspondence audits, which make up the majority of all IRS audits, as a prime area for improvement.
O’Donnell said there is a “real opportunity in that space, I think, to move to something that is much less manual, much less human intervention, something that can be systemically done.” This automation, he argued, could free up employees to provide direct taxpayer service, such as answering phones.
However, the panelists cautioned that a technological transformation is not possible without financial stability. Koskinen warned that successful, long-term technology modernization is impossible without predictable funding. A return to a start-and-stop annual appropriations process, he said, would severely hamper the IRS’ ability to execute a strategic tech investment.
“You have to not only have a plan, you have to have a funding system that supports that plan,” Koskinen stated. “You cannot start it and stop it … and expect that you’re going to be efficient.”
DOJ Tax Division
The panel also addressed the dramatic reorganization at the Department of Justice, where the Tax Division was eliminated as a standalone component after 90 years. Francesca Ugolini, former Chief of the Tax Division, explained that the division was not eliminated, but rather its functions were moved.
The civil tax litigation sections were placed in a new unit within the DOJ’s Civil Division, while criminal tax functions were moved to the Criminal Division. “So in their new homes in Civil and Criminal the tax functions remain distinct units,” she explained. “They haven’t been dispersed among the Civil and Criminal divisions and just merged into other sections.”
The uncertainty surrounding the reorganization led to an exodus of experienced staff. “Ultimately about 30% of the staff ended up leaving, primarily through voluntary departures,” Ugolini said, adding that this included many senior leaders with decades of experience.
The result is that the remaining attorneys are under immense pressure. “You have the same caseload being handled by 70% of the staff. And so that puts a huge strain on the attorneys who remain there,” she added.
Despite the challenges, Ugolini expressed optimism about the new leadership within the Civil and Criminal Divisions and the talent of the remaining staff. She stressed that the DOJ’s tax caseload is entirely dependent on referrals from the IRS, meaning the IRS’ own stability and enforcement priorities will directly shape the future of tax litigation.
In the end, she concluded, what the future of tax enforcement looks like “will depend heavily on what’s happening at the IRS.”
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