Taxpayers and practitioners must be more diligent, persistent, and organized in 2026 to navigate a “thoroughly exhausted” and understaffed IRS, according to Jared Slipman, chair of Obermayer’s Tax Department.
Citing recent staffing reductions, leadership turmoil, and the lingering effects of government shutdowns, Slipman told Checkpoint that the burden has shifted to taxpayers to ensure their issues are resolved correctly. But he is also hopeful about the role of technology at a downsized IRS.
An Agency in Flux
The IRS is navigating a period of significant upheaval, with its workforce reduced from approximately 100,000 in 2025 to around 75,000 staff currently. The reductions include a 30% cut to audit staff and a 20% cut in customer service representatives, leaving remaining employees “working double time,” Slipman said.
Beyond the staffing cuts, the agency has gone through a number of leadership changes in the last year. Slipman explained that at the IRS, “every time there’s a sea change in terms of new leadership, the question is, ‘Okay, what’s the enforcement policy?'” He described the agency’s enforcement policy as top-down. But with all the leadership changes in 2025, “there’s just kind of been a lack of direction,” he added.
And the IRS is also facing new budgetary constraints. Last week, President Trump signed into law a package to fund several agencies, including the IRS, through fiscal year 2026. The package bumps up IRS funding for taxpayer services but reduces funding for both enforcement and technology and operations. The package also rescinds $11.66 billion in additional IRS Inflation Reduction Act funding.
Tips for Dealing With a Downsized IRS
Slipman offered several tips for interacting with the strained agency. The key, he said, is to make the process as easy as possible for the overwhelmed IRS employee on the other end.
Be persistent and document everything. “Don’t take silence as an answer from the service,” Slipman warned. He advised putting all correspondence in writing to create a clear record of compliance and advocacy.
He shared an example of a client audit where the assigned auditor departed from the IRS mid-case without notification. By continuing to file all requested documents and log all communication attempts, he eventually resolved the case with no change because the client had demonstrated full compliance.
He also suggests providing detailed background information in an “easily digestible format” to IRS staff from the start. “You do want to set the table appropriately,” he said, because staff “just doesn’t have the bandwidth to process” piecemeal information.
This approach helps the agent and builds a strong record for a potential appeal. “Make it easy for them to make a decision in your favor,” Slipman stressed.
Plan diligently for complex issues. Resolving more complex issues has become “very difficult” with fewer staff available to help, Slipman said. He gave the example of businesses shifting to an S corporation structure but needing to meet the in-depth requirements under IRC § 1361.
Slipman said he’s had clients with S election revocations – or where the IRS determined that their S election has been terminated. “It’s been very difficult to get a resolution from the service” for these clients he explained, noting there are fewer agency staff “answering the phone.”
And if a client doesn’t hear from the IRS after an S corporation revocation, Slipman said that raises additional compliance issues. “Do you stick with the fact that you’re still an S corporation and file an 1120-S, or do you comport with a notice that you received from the IRS?”
But he stressed that the potential for issues with the IRS should not dictate planning. He does recommend “a little bit of dedication on the front end” to avoid problems on the back end.
Respect tax laws. Slipman said that a “lay taxpayer” might conclude that “nobody is really ‘watching the shop’ closely” at the IRS right now. “I would say that’s not the case,” he stressed.
He advised against “pushing on tax strategies” even though the IRS doesn’t currently have the same level of staff dedicated to review. “The IRS has a three-year statute of limitations to look back and audit any transaction in any filing,” said Slipman. “They have no statute of limitations if you do something that’s fraudulent or you fail to file a return.”
With fewer auditors handling more cases, he noted, it is more likely that audits will drag on or that agents will have less “brainpower allocated to each audit.” But while review might be markedly slower than in the past, in Slipman’s view, “the IRS is the largest collection agency on the planet, and they will try to collect.”
Technology’s Role
Looking forward, Slipman hopes the IRS will prioritize technological modernizations to operate more effectively with a smaller staff.
One development he hopes to see is a unified, possibly AI-powered, system to connect the “15 or 20 different departments” within the agency. He noted that right now, “the right hand really isn’t shaking the left.” A unified system would allow for “faster cross-departmental communication and information transmittal.”
He also recommends the agency develop an AI-based phone agent to answer basic taxpayer questions. He noted that the IRS has decreased its target phone call response rate for 2026. For phone calls that go unanswered, there’s a higher risk of “mistakes on a return.” He feels an AI-based phone agent could serve as a “frontline defense” at the initial point of contact with taxpayers. “You’d be able to free customer service representatives up to answer more complicated questions.”
And there are plenty of other opportunities to streamline IRS functions via technology, according to Slipman. Returning to S corporation elections, he suggests these really shouldn’t require legal memoranda. In his view, these elections “should be something where you can communicate with the service electronically and have it adjudicated in an expedited way via AI or some other easy-to-use online platform.”
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