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The Internal Revenue Service, like other government agencies, is a target of thinning and deregulation under the Trump administration and the Department of Government Efficiency, formerly led by Elon Musk. With a new commissioner on the horizon, and everchanging guidelines, here are the latest moves from the IRS.

A campaign to grant Immigration and Customs Enforcement agents access to tax records gained some ground in May, as Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem permitted the IRS to share taxpayer information under very limited circumstances. 

In exchange for ICE’s provision of a person’s name, address and deportation order date, the IRS can release taxpayer data — but only for non-tax criminal matters.

Read more: IRS to lose billions if migrants stop filing taxes

The IRS has gone through a host of acting commissioners since Donald Trump took office and following the resignation of former Commissioner Danny Werfel. Douglas O’Donnell succeeded Werfel after his Jan. 20 resignation and retired just one month later.

After O’Donnell was Melanie Krause, who was chief operating officer of the IRS prior to being named acting commissioner in February. She held onto the top spot until her resignation in April, and was followed by Gary Shapley, a former special agent in the IRS’s Criminal Investigation division. 

Shapely held the role for two days, ceding it to present acting IRS Commissioner Michael Faulkender.

These moves, combined with mass layoffs, have created an air of uncertainty at the IRS.

According to a recent report from the Treasury Inspector General for Tax Administration, the agency is poised to become more earnest in its use of artificial intelligence during the auditing process in light of the dropped audits from its reduced headcount.

“There have been news reports about audits that are in process or that are even close to being wrapped up being canceled because members of that audit team were let go and they just didn’t have the staff to carry them on,” Anne Gibson, a senior legal analyst at Wolters Kluwer, told Accounting Today. “I imagine we’ll see more of that.”

Read more: DOGE downsizing, IRS commissioner switch complicate tax season

Below are noteworthy changes from the IRS and what accountants need to know.

IRS lead nominee Billy Long grilled by Senate Finance panel

Billy Long, the Trump nominee for IRS commissioner, faced probing questions from the Senate Finance Committee on monetary sums earned from promoting tribal tax credits and a failed 2022 Senate campaign, his plans for the agency if confirmed and more.

The former Republican congressman’s December nomination came during then-commissioner Danny Werfel’s term, which was set to conclude in November 2027 but ended when Werfel resigned on Jan. 20. Thus began the revolving door at the head of the IRS and the comings and goings of four acting commissioners.

“I am eager to implement the necessary changes to maximize our effectiveness while also remaining transparent with both Congress and taxpayers,” Long said in his opening statement. “It is important to also recognize the dedicated professionals currently at the IRS whose hard work too often goes unnoticed.”

Read more: Senate panel grills IRS commissioner nominee Billy Long

Samuel Corum/Bloomberg

DOGE cuts oust roughly one-third of IRS auditors

Between layoffs and deferred resignations under the Department of Government Efficiency, the IRS has parted ways with roughly 31% of its auditors.

This announcement follows in the wake of the more than 11,400 employees that were laid off earlier this year as part of the same push from DOGE to curtail perceived overspending from government agencies. 

Findings from the Treasury Inspector General for Tax Administration’s recent report concluded that these firings disproportionately impacted various divisions across the IRS, with divisions such as Tax Exempt & Government Entities, Large Business & International and Small Business & Self-Employed all recording double-digit headcount reductions as of March 2025.

Read more: IRS lost 31% of auditors in DOGE downsizing

IRS falls short of improper payment rate benchmark

A report released in May by the Treasury Inspector General for Tax Administration determined that the IRS still has work to do in achieving the goal of the Payment Integrity Information Act.

The 2019 act’s goal directs the IRA to reduce improper payment rates to less than 10% for four refundable tax credits — the Additional Child Tax Credit, the American Opportunity Tax Credit, the Earned Income Tax Credit and the Net Premium Tax Credit. For the 2024 fiscal year, improper payments for the four credits amounted to roughly $21.4 billion.

The rates for each were 29% for the Net Premium Tax Credit, 28% for the AOTC, 27% for the EITC and 11% for the ACTC.

Read more: Improper payment rate still too high at IRS

IRS to slightly raise HSA limits for 2026

IRS executives said the agency will raise inflation-adjusted amounts for health savings accounts in 2026, but only slightly.

Individuals with self-only coverage tied to a high-deductible health plan have an annual limitation of $4,400 for the 2026 calendar year, which is a $100 bump from 2025’s limit.

Other noteworthy increases include the $8,750 annual limitation for individuals with family coverage under a high-deductible health plan and the limits for what defines a high-deductible health plan, which have deductibles not less than $1,700 for self-only coverage (up $50 from 2025) or $3,400 for family coverage (from $3,300 in 2025), and for which annual out-of-pocket expenses (but not premiums) are less than $8,500 for self-only coverage (up $100 from this year) or $17,000 for family coverage (up from this year’s $16,600).

Read more: HSA limits to get a modest bump

Stefani Reynolds/Bloomberg

IRS crackdown on high-income non-filers needs improvement

Officials with the Treasury Inspector General for Tax Administration found that IRS “sweeps” that uncovered instances of high-income people not filing taxes were more productive than their non-sweep counterparts, both in terms of closure rate and dollars collected.

The TIGTA report said that revenue officers were able to bring in between 30% to 68% more on average per HINF sweep case than non-sweep case for tax years 2014 through 2020.

“When people don’t file a tax return they’re required to, it’s not fair to those hardworking taxpayers who responsibly do their civic duty under the laws of our nation,” Danny Werfel, former IRS commissioner, said during a press call last year. “When people don’t file their taxes, they need to know there’s a consequence, [and] this is why I was particularly troubled to learn when I became commissioner that the IRS had to back off our core compliance work on non-filers.”

Read more: IRS faces issues in crackdown on high-income non-filers

PKF O’Connor Davies, a Top 25 Firm based in New York, is adding Rainer & Co., a firm based in Philadelphia.

Financial terms of the deal were not disclosed. Rainer has four shareholders and 25 staff members. After the acquisition, PKFOD will have approximately 1,800 employees. PKFOD ranked No. 25 on Accounting Today‘s 2025 list of the Top 100 Firms, with $410 million in annual revenue and 214 partners.

“Adding Rainer & Company aligns with PKF O’Connor Davies’ overall growth strategy. We are continuing to thoughtfully expand our talented team in regions and practice areas that will allow us to best leverage our platform for our growing client base” said PKF O’Connor Davies CEO Kevin Keane in a statement Monday.

Rainer was founded in 1954 and offers a variety of accounting, tax and business advisory services to commercial, individual, not-for-profit and government clients. It specializes in industries including construction, real estate and manufacturing, as well as employee retirement plans.

“Joining forces with PKF O’Connor Davies not only represents a significant milestone in our firm’s history but it also broadens their growing regional presence,” said Rainer managing shareholder Joseph Fabrizio in a statement. “Our partnership will yield ongoing benefits for our clients, including access to PKF O’Connor Davies’ industry-leading resources, global network and top-notch experts. I look forward to our continued work together.”

Ira Rosenbloom of Optimum Strategies served as strategic partner to both parties in the deal.

Last November PKFOD announced strategic growth investment from the Public Sector Pension Investment Board, one of Canada’s largest pension investment managers, and Investcorp, which formerly owned Accounting Today‘s parent company. The firm said it’s continuing to advance its market expansion, introducing new services across various industries and regions.

In January 2924, PKFOD merged in Robert Philipson & Co., a firm in Silver Spring, Maryland. In 2023, PKF O’Connor Davies merged in Archambault & Associates, a firm in Wakefield, Massachusetts, that specializes in trust and estate matters and private client group services. In 2022, PKFOD added Judelson, Giordano and Siegel, a firm in Middletown and Poughkeepsie, New York, and Simon, Tapper, Edelman & Wilner, a firm in Hackensack, New Jersey. In 2021, it acquired another New Jersey firm, LB Goodman & Co., in Fair Lawn, and added DGC LLP (formerly DiCicco, Gulman & Co.), in Boston. 

The American Institute of CPAs is asking leaders of the Senate Finance Committee and the House Ways and Means Committee to make changes in the wide-ranging tax and spending legislation that was passed in the House last week and is now in the Senate, especially provisions that have a significant impact on accounting firms and tax professionals.

In a letter Thursday, the AICPA outlined its concerns about changes in the deductibility of state and local taxes pass-through entities such as accounting and law firms that fit the definition of “specified service trades or businesses.” The AICPA urged CPAs to contact lawmakers ahead of passage of the bill in the House and spoke out earlier about concerns to changes to the deductibility of state and local taxes for pass-through entities. 

“While we support portions of the legislation, we do have significant concerns regarding several provisions in the bill, including one which threatens to severely limit the deductibility of state and local tax (SALT) by certain businesses,” wrote AICPA Tax Executive Committee chair Cheri Freeh in the letter. “This outcome is contrary to the intentions of the One Big Beautiful Bill Act, which is to strengthen small businesses and enhance small business relief.”

The AICPA urged lawmakers to retain entity-level deductibility of state and local taxes for all pass-through entities, strike the contingency fee provision, allow excess business loss carryforwards to offset business and nonbusiness income, and retain the deductibility of state and local taxes for all pass-through entities.

The proposal goes beyond accounting firms. According to the IRS, “an SSTB is a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading or dealing in certain assets, or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners.”

The AICPA argued that SSTBs would be unfairly economically disadvantaged simply by existing as a certain type of business and the parity gap among SSTBs and non-SSTBs and C corporations would widen.

Under current tax law (and before the passage of the Tax Cuts and Jobs Act of 2017), it noted, C corporations could deduct SALT in determining their federal taxable income. Prior to the TCJA, owners of PTEs (and sole proprietorships that itemized deductions) were also allowed to deduct SALT on income earned by the PTE (or sole proprietorship). 

“However, the TCJA placed a limitation on the individual SALT deduction,” Freeh wrote. “In response, 36 states (of the 41 that have a state income tax) enacted or proposed various approaches to mitigate the individual SALT limitation by shifting the SALT liability on PTE income from the owner to the PTE. This approach restored parity among businesses and was approved by the IRS through Notice 2020-75, by allowing PTEs to deduct PTE taxes paid to domestic jurisdictions in computing the entity’s federal non-separately stated income or loss. Under this approved approach, the PTE tax does not count against partners’/owners’ individual federal SALT deduction limit. Rather, the PTE pays the SALT, and the partners/owners fully deduct the amount of their distributive share of the state taxes paid by the PTE for federal income tax purposes.”

The AICPA pointed out that C corporations enjoy a number of advantages, including an unlimited SALT deduction, a 21% corporate tax rate, a lower tax rate on dividends for owners, and the ability for owners to defer income. 

“However, many SSTBs are restricted from organizing as a C corporation, leaving them with no option to escape the harsh results of the SSTB distinction and limiting their SALT deduction,” said the letter. “In addition, non-SSTBs are entitled to an unfettered qualified business income (QBI) deduction under Internal Revenue Code section 199A, while SSTBs are subject to harsh limitations on their ability to claim a QBI deduction.”

The AICPA also believes the bill would add significant complexity and uncertainty for all pass-through entities, which would be required to perform complex calculations and analysis to determine if they are eligible for any SALT deduction. “To determine eligibility for state and local income taxes, non-SSTBs would need to perform a gross receipts calculation,” said the letter. “To determine eligibility for all other state and local taxes, pass-through entities would need to determine eligibility under the substitute payments provision (another complex set of calculations). Our laws should not discourage the formation of critical service-based businesses and, therefore, disincentivize professionals from entering such trades and businesses. Therefore, we urge Congress to allow all business entities, including SSTBs, to deduct state and local taxes paid or accrued in carrying on a trade or business.”

Tax professionals have been hearing about the problem from the Institute’s outreach campaign. 

“The AICPA was making some noise about that provision and encouraging some grassroots lobbying in the industry around that provision, given its impact on accounting firms,” said Jess LeDonne, director of tax technical at the Bonadio Group. “It did survive on the House side. It is still in there, specifically meaning the nonqualifying businesses, including SSTBs. I will wait and see if some of those efforts from industry leaders in the AICPA maybe move the needle on the Senate side.”

Contingency fees

The AICPA also objects to another provision in the bill involving contingency fees affecting the tax profession. It would allow contingency fee arrangements for all tax preparation activities, including those involving the submission of an original tax return. 

“The preparation of an original return on a contingent fee basis could be an incentive to prepare questionable returns, which would result in an open invitation to unscrupulous tax preparers to engage in fraudulent preparation activities that takes advantage of both the U.S. tax system and taxpayers,” said the AICPA. “Unknowing taxpayers would ultimately bear the cost of these fee arrangements, since they will have remitted the fee to the preparer, long before an assessment is made upon the examination of the return.”

The AICPA pointed out that contingent fee arrangements were associated with many of the abuses in the Employee Retention Credit program, in both original and amended return filings.

“Allowing contingent fee arrangements to be used in the preparation of the annual original income tax returns is an open invitation to abuse the tax system and leaves the IRS unable to sufficiently address this problem,” said the letter. “Congress should strike the contingent fee provision from the tax bill. If Congress wants to include the provision on contingency fees, we recommend that Congress provide that where contingent fees are permitted for amended returns and claims for refund, a paid return preparer is required to disclose that the return or claim is prepared under a contingent fee agreement. Disclosure of a contingent fee arrangement deters potential abuse, helps ensure the integrity of the tax preparation process, and ensures compliance with regulatory and ethical standards.”

Business loss carryforwards

The AICPA also called for allowing excess business loss carryforwards to offset business and nonbusiness income. It noted that the One Big Beautiful Bill Act amends Section 461(l)(2) of the Tax Code to provide that any excess business loss carries over as an excess business loss, rather than a net operating loss. 

“This amendment would effectively provide for a permanent disallowance of any business losses unless or until the taxpayer has other business income,” said letter. “For example, a taxpayer that sells a business and recognizes a large ordinary loss in that year would be limited in each carryover year indefinitely, during which time the taxpayer is unlikely to have any additional business income. The bill should be amended to remove this provision and to retain the treatment of excess business loss carryforwards under current law, which is that the excess business loss carries over as a net operating loss (at which point it is no longer subject to section 461(l) in the carryforward year).

AICPA supports provisions

The AICPA added that it supported a number of provisions in the bill, despite those concerns. The provisions it supports and has advocated for in the past include 

• Allow Section 529 plan funds to be used for post-secondary credential expenses;
• Provide tax relief for individuals and businesses affected by natural disasters, albeit not
permanent;
• Make permanent the QBI deduction, increase the QBI deduction percentage, and expand the QBI deduction limit phase-in range;
• Create new Section 174A for expensing of domestic research and experimental expenditures and suspend required capitalization of such expenditures;
• Retain the current increased individual Alternative Minimum Tax exemption amounts;
• Preserve the cash method of accounting for tax purposes;
• Increase the Form 1099-K reporting threshold for third-party payment platforms;
• Make permanent the paid family leave tax credit;
• Make permanent extensions of international tax rates for foreign-derived intangible income, base erosion and anti-abuse tax, and global intangible low-taxed income;
• Exclude from GILTI certain income derived from services performed in the Virgin
Islands;
• Provide greater certainty and clarity via permanent tax provisions, rather than sunset
tax provisions.