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Tax season is underway, and the Internal Revenue Service is racing towards a major precipice. Hiring freezes and firings, proposed filing changes and the foreboding presence of Elon Musk’s Department of Government Efficiency promise to bring widespread change to the agency — but only time will tell if that change is good or bad.

In his first few days in office, President Donald Trump signed a rash of executive orders that included a government-wide hiring freeze (with a specific focus on the IRS) and the departure from a global tax deal brought about during the Biden administration.

“I will also issue a temporary hiring freeze to ensure that we are hiring only competent people who are faithful to the American public. And we will pause the hiring of any new IRS agents,” Trump said while signing orders following his inauguration.

Read more: IRS layoffs expected despite tax season assurances

Since then, lawmakers with the House Ways and Means Committee have advanced several bills that were part of earlier draft legislation proposed by Senate Finance Committee Chairman Mike Crapo, R-Idaho, and ranking member Ron Wyden, D-Oregon, known as the Taxpayer Assistance and Service Act.

Two noteworthy pieces of legislation are the Electronic Filing and Payment Fairness Act and the IRS Math and Taxpayer Help Act. The first would apply the “mailbox rule” regarding the timely submission of payments and documents to electronically submitted tax returns and payments. This standard currently applies only to physical documents.

The second seeks to provide taxpayers with more transparency into the IRS’ “math error” correction process for tax returns with math or clerical errors. If passed, the IRS would be required to provide reasoning behind the errors as well as a 60-day challenge period for taxpayers to confirm or refute the assessment of the error.

Read more: House committee advances IRS legislation

The newest change on the horizon for the IRS is a potential partnership with the White House’s Office of Personnel Management to grant certain officials unlimited access to taxpayer data, as originally reported by Bloomberg.

Few details are available from the draft agreement, which was obtained by Bloomberg Tax, but the deal would allow Gavin Kliger, a special advisor to the director at the OPM, to view troves of taxpayer information for debugging, software testing, programming and other purposes while working with the IRS, according to the memo.

Read on to dive into the latest coverage of Trump’s impact on the IRS, as well as procedural changes and other regulatory moves influencing taxpayers.

DeFi firms catch a break on new tax reporting standards

While digital asset brokers, banks, traders and other individual cryptocurrency players are now required to start reporting their customers’ digital assets to the IRS, decentralized finance firms are enjoying the two-year buffer period — with a pro-crypto Trump administration potentially yielding future wins.

“Virtually the only part of DeFi that has any obligations at all under these regs are front-end service providers. … So everybody in the other layers of the DeFi stack doesn’t need to worry about anything,” Jonathan Jackel, managing director in the information reporting and withholding practice at Big Four firm EY, told Accounting Today’s Michael Cohn.

This hasn’t stopped the Blockchain Association, the Texas Blockchain Council and the DeFi Education Fund from jointly filing a lawsuit against the IRS for the final regulations they say “exceed the agencies’ statutory authority, violate the Administrative Procedure Act and [are] unconstitutional,” according to a December press release. 

Read more: DeFi companies win reprieve on tax reporting

IRS employee union calls Trump buyout deal “bait-and-switch”

IRS employees who opted to take the Trump administration’s federal worker buyout plan were left distraught to find that they will be required to work through May 15 to handle the onslaught of tax season, drawing widespread criticism from unionized workers.

Doreen Greenwald, national president of the National Treasury Employees Union, said in a Feb. 5 statement that those working in the IRS’s Taxpayer Services, Information Technology and Taxpayer Advocate Service divisions who agreed to the “deferred resignation” can’t accept until May 15 “because their work is essential to the tax filing season.”

“Not only is this a clear case of bait-and-switch — they were originally told they would be paid to not work through Sept. 30 — but it proves that the terms of the OPM’s so-called offer are unreliable and cannot be trusted,” Greenwald said.

Read more: IRS employees who took buyout told to stay through May 15

The ins and outs of the new liability appeal process at the IRS

The IRS closed out the last weeks of former President Joe Biden’s administration by finalizing a new appeals process for taxpayers disputing their liability calculation. Enter the Independent Office of Appeals.

The final rules build on the 2019 Taxpayer First Act introduced by Rep. John Lewis, D-Ga., which created the IRS’s Independent Office of Appeals to “resolve federal tax controversies without litigation on a basis that is fair and impartial, to promote consistent application of federal tax laws and to enhance public confidence in the IRS,” according to the text of the bill.

Part of the appeal process, which is available for most taxpayers, provides those whose appeals are denied with a detailed explanation of the decision and allows those with $400,000 or less in annual income to gain access to all non-privileged aspects of their case files, according to a guide to the law from “The Tax Adviser” journal. 

Read more: Advisors and clients have a newly codified appeals process at the IRS

ID theft victims see shorter turnaround for IRS help

Identity theft is a rampant problem in the tax world, one that the IRS has faced difficulty addressing amid a rise in scammers pretending to be representatives of the agency. But hope is on the horizon for taxpayers.

National Taxpayer Advocate Erin Collins provided insight into the IRS’s average timeframe for handling identity theft cases, which jumped from 299 days in the 2022 fiscal year to 676 days in the 2024 fiscal year. This year produced the first drop in that metric — to 506 days — for the IRS’s Accounts Management inventory.

“It is sad that a decrease to 506 days is good news, but after years of increases, it is positive to see the average IDTVA case processing cycle times going down instead of up,” Collins wrote.

Read more: IRS reduces wait times for some ID theft victims

IRS unable to confirm eligibility of LITC grant recipients: Report

The Treasury Inspector General for Tax Administration concluded in a new report that regulations from the White House Office of Management and Budget forbid the IRS’s Low Income Taxpayer Clinics Program Office from viewing client information — effectively handcuffing the IRS’s ability to determine whether or not grant recipients are eligible.  

The TIGTA drew this conclusion in part by looking at a sample of grant applications along with interim and year-end review summary reports for 15 out of 130 LITCs from the 2022 grant year. 

“While we found that the Program Office reviewed all 15 LITC budget worksheets in our sample to ensure that the applicants listed their matching fund sources in detail and provided narratives to detail their calculations, it did not require the LITCs to provide supporting documentation to validate the existence or value of the matching contributions. … Therefore, we were unable to determine if the reviews were effective,” the report said.

Read more: IRS can’t verify LITC grant recipient eligibility