Accounting
IRS faces steep budget cuts without congressional action
The Treasury Department is warning Congress that it needs lawmakers to unlock $20 billion in funding for the Internal Revenue Service that could be rescinded due to duplicative legislative language.
The $20 billion is targeted at IRS enforcement and is separate from the more than $20 billion that has already been clawed back from the Inflation Reduction Act’s extra $80 billion in funding for the IRS over a decade. If Congress doesn’t act during the appropriations process before the end of President Biden’s term, the $20 billion may be rescinded, putting at risk the IRS’s ability to hire more employees and carry out its duties next tax season.
“The IRS is going to potentially have to make dramatic decisions about stopping hiring and starting to budget for a world [in] which they don’t have $20 billion, which will stop a lot of their progress,” Treasury Deputy Secretary Wally Adeyemo said during a call with reporters Tuesday, according to the
The IRS received an extra $80 billion in funding over 10 years for enforcement, taxpayer service and technology upgrades as part of the Inflation Reduction Act of 2022. But as part of a deal to raise the debt ceiling in 2023, the funding was reduced by $1.4 billion, and later as part of another agreement last year an additional $20 billion of the tax enforcement money was distributed to other federal agencies for nondefense spending. That $20 billion cut was mistakenly duplicated in the legislative language, so the IRS faces another steep budget cut unless Congress acts to amend the language during its year-end appropriations process.
The budget cuts could also exacerbate the deficit as the extra money for tax enforcement was expected to generate tax revenue. The Treasury estimated the national debt could grow by $140 billion without the extra funding for tax enforcement.
The incoming Trump administration is already expected to slash IRS enforcement funding once President-elect Trump takes office. Republican lawmakers have been calling for cuts in the IRS budget, including the
Despite opposition among many Republicans in Congress to the Direct File program, Direct File may have the support of Tesla CEO Elon Musk, who has been assigned by President Trump to head a new Department of Government Efficiency with former GOP presidential candidate Vivek Ramaswamy with the goal of cutting waste and inefficiency in the federal government. On the recently created X account for DOGE, they
“In 1955, there were less than 1.5 million words in the U.S. Tax Code,” said the DOGE account. “Today, there are more than 16 million words. Because of this complexity, Americans collectively spend 6.5 billion hours preparing and filing their taxes each year. This must be simplified.”
However, that doesn’t necessarily mean the Trump administration will preserve the IRS Direct File program after next tax season.
“I would anticipate that it goes forward this coming year, in other words, for the 2024 filing season,” said former Intuit CEO Bill Harris, who developed TurboTax when he was president of ChipSoft, which Intuit acquired in 1993. “I’m sure it’s already all baked. The following year, it could just go away. I would bet more that it just withers on the vine. But I think that’s too bad too because one of the things that the IRS really needs to do is take a customer-focused view.”
He acknowledged, however, that Intuit and other tax software companies have been fighting to end the Direct File program.
“Some people, for instance, at the tax preparation software companies, are against it because they perceive it to be competition,” said Harris, who is now founding CEO of Evergreen Money, a development-stage financial services company. “I really don’t think that that’s the proper view. I think the proper view is that for the kinds of simple returns that they’re capable of handling, I think that’s great, and people should have a free mechanism to do that. And it’s also clear that the government will never be in a position to build something that’s terribly sophisticated. And so even for people with moderately complex taxes, they’re going to need something like professionally and privately built tax software. I see this as an opportunity for an excellent private-public partnership, so I hope the IRS continues with it, and I hope that the private companies embrace it.”
After leaving Intuit in 1999, Harris was co-founding CEO of PayPal, which merged Elon Musk’s X.com with Peter Thiel’s Confinity. Accounting Today asked Harris what he thought of the prospects for Musk’s DOGE to find enough savings from cutting government waste to make up for the lost tax revenue from the extension of the Tax Cuts and Jobs Act and the various tax exemptions proposed by Trump on tip income, overtime pay, Social Security benefits and more.
“Nothing to do with Elon Musk, although I know he’s obviously going to be a part of this, but absent any personalities, it’s remarkably hard even for a Republican administration to rein in costs,” Harris replied. “Certainly the initial Trump administration did not do that. They expanded expenditures. There was a big runup in the debt, particularly as the party has moved from traditional Republican notions of fiscal conservatism to essentially populism.”
Cutting the IRS enforcement budget could contribute to the national debt, as the Treasury Department warned, and could have a spillover effect leading to slowdowns in taxpayer service and technology improvements as well.
“You could see monies being taken away from enforcement, but probably continuing the customer service modernization portion of the IRS,” said Tax Guard CEO Hansen Rada. “The IRS requires a lot of people because the Tax Code is so complicated, and that’s really Congress’s fault. It’s not the IRS’s fault. It’s almost like yelling at the policeman when he pulls you over for speeding. If you want the speed limit raised, you go to your local representatives, you don’t yell at the policemen, and the IRS is just the enforcement arm. Barring any sort of drastic change to simplification of the Code, it’s going to require people, because of deductions and all the other considerations in order to execute that. The vast majority of returns are simple returns, W-2’s, and so this Direct File, or this app that Elon hinted at would be a modernization effort to help the majority of returns, but not the complicated ones, and that still would require people.”
Treasury Secretary Scott Bessent named Internal Revenue Service chief operating officer Melanie Krause as acting commissioner after the retirement of acting commissioner Douglas O’Donnell.
O’Donnell has been acting commissioner since January, taking over from former IRS commissioner Danny Werfel, who announced he would be
“The IRS has been my professional home for 38 years,” O’Donnell said in a statement Tuesday. “I care deeply about the institution and its people and am confident that Melanie will be an outstanding steward of the Service until a new Commissioner is confirmed.”
The IRS has been going through a period of turmoil, with an estimated
Senate confirmation hearings have not yet been scheduled for Long, but he is expected to be questioned about his record of
Until Long is confirmed, IRS COO Krause will now move into O’Donnell’s deputy commissioner role and serve as acting commissioner of the nation’s tax agency.
“On behalf of the Treasury Department, I want to thank Doug O’Donnell for his decades of public service and dedication to the nation’s taxpayers,” Bessent said in a statement Tuesday. “He has been a remarkable public servant, and I wish him the best in retirement. At the same time, Melanie Krause and the agency’s leadership team are well positioned to serve during this critical period for the nation in advance of the April tax deadline.”
Krause has served as IRS COO since April 2024 after acting as deputy commissioner of operations support since January of the same year. As COO, she oversees the operations including the Chief Financial Officer; Chief Risk Office; Facilities Management and Security Services; Human Capital Office; Office of Chief Procurement; Privacy, Governmental Liaison and Disclosure; Research, Applied Analytics and Statistics.
She began her career at the IRS in October 2021 as chief data and analytics officer. In this role, in addition to leading the RAAS team, Krause also coordinated research activities including using AI and other advanced analytics. Krause also served as acting deputy commissioner for services and enforcement from November 2022 to March 2023.
Prior to joining the IRS, Krause spent 12 years in the federal oversight community, including the Government Accountability Office and the Department of Veterans Affairs Office of Inspector General. Krause also maintains an active license as a registered nurse. She holds bachelor, master and doctoral degrees from the University of Wisconsin-Madison.
The Pennsylvania Institute of CPAs released a
The report analyzes how accounting firms in Pennsylvania are structuring compensation, navigating retention and recruitment challenges, and adapting their benefits to remain competitive.
Jennifer Cryder
“Our latest findings make it clear: salary alone isn’t enough to attract and retain top talent in today’s market and firms need to be thinking differently about what matters,” said PICPA CEO Jennifer Cryder in a statement. “Holistic compensation strategies that include competitive benefits, flexible work arrangements, and clear career development pathways are critical in today’s world. Above all, we intend for this report to provide firm leaders with the insights they need to build a sustainable workforce for the future.”
The report found the firms surveyed by PICPA are experiencing inconsistencies in their ability to retain talent, with 48.3% reporting an increase in staff retention, while 24.1% of the respondents saw a decrease and 27.6% said retention remained stable. Firms reported an average salary increase of 8% in June 2024, up from 5% in July 2023, indicating slow but consistent average salary growth.
Offering comprehensive benefits remains a priority, with 88.5% of the firms surveyed providing medical insurance, 80.8% offering dental coverage, and 73.1% including vision insurance for employees.
Efforts to attract talent are changing, with 58.7% of the firms that responded to the survey increasing their hiring activity over the past year, while 37.9% maintained steady recruitment levels.
Many firms are responding to employee expectations for work-life balance, with 80% of the surveyed firms allowing flex hours outside of core hours and 76.9% offering flexible work options year-round.
With over half (54.2%) of the surveyed firms identifying hiring and talent retention as a top priority in 2025, the report stresses the need for firms to move beyond traditional compensation models. The report found a shift toward total rewards strategies — integrating salary, benefits, professional development and work-life balance — is essential to attracting and retaining top talent in an increasingly competitive market.
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