The 2026 tax season brings heightened risks. Paradoxically, reductions of IRS budgets and staff under the Trump administration make diligence with your federal tax return more important than ever. Advanced IRS computer technology means that mistakes on tax returns are easier to catch and penalize. At the same time, workforce cuts and a processing backlog at the IRS mean that fixing a faulty return could take years.
That is not an exaggeration. “We’re getting notices now that things are getting resolved from 2023 because there’s such a big backlog at the IRS,” said CPA Stephanie Bucko, co-founder of Mana Financial in Los Angeles, in a recent webinar on the 2026 tax season that I moderated. She was one of three tax advisors on the webinar’s panel of experts, all of whom reported similar observations about the current state of the IRS.
“A lot of clients are asking questions about this,” she continued. “We’re even more disciplined now because we’re realizing that if clients have any mistakes it’s going to take them a really long time to resolve issues.”
A live poll conducted during the webinar revealed that most of the tax and financial advisors who attended the event have noticed changes for the worse at the IRS.
As I warned in my recent Forbes.com article 5 Bad Tax-Return Mistakes To Avoid With RSUs, Stock Options, And ESPPs, this is definitely not the year to slack off on your return.
The State Of The IRS
The anecdotal IRS experiences of advisors have been corroborated officially. A report published in January by the Treasury Inspector General for Tax Administration, the government’s IRS watchdog, revealed an unusually long backlog in the processing of amended tax returns and taxpayer correspondence.
The reasons are clear. The 2026 annual report to Congress by the National Taxpayer Advocate stated that in 2025 the IRS workforce shrank from roughly 102,000 employees to just 74,000. That is a reduction in force of 27%. Staff departures, whether from incentives to leave or involuntary layoffs, have occurred in nearly all IRS departments, including Taxpayer Services.
The staff exodus at the IRS has been matched by budget cuts from the Trump-era Congress. The current Congress has revoked billions of dollars from the additional IRS funding that the Biden-era Congress approved under the Inflation Reduction Act, primarily for tax enforcement and modernization.
On top of it all, the longest-ever government shutdown in October and November of last year worsened the work backlog at the IRS.
Sharper Error Detection, Slower Error Resolution
Despite its reduction in size and funds, the IRS remains a competent government agency filled with employees who are as proudly committed to their mission as those in the military. They are also equipped with capable technology.
IRS computers have proved very effective in catching mistakes on tax returns by matching them with the third-party filings that the IRS receives, such as Form 1099-B from brokers and Form W-2 from employers, as explained in my Forbes.com article series How The IRS Picks Tax Returns To Audit: A Tax-Law Expert Explains. Expanded use of AI and other technologies will help the IRS catch more errors and do so faster.
The juxtaposition of growing IRS enforcement technology and shrinking IRS staff means that taxpayers now could face the worst of both worlds: Mistakes on tax returns are more likely than ever to be caught, triggering IRS attention, but the resolution of problems could take longer than ever.
Advisors Recommend Extreme Care With Tax Returns
Nobody is more aware of this than tax advisors. “If anything, this is the time to be more diligent, to prevent that hassle of going back and having to amend things and waiting a couple of years to see where that lands,” cautioned CFP and Enrolled Agent Josh Radman, founder of Presidio Advisors in Denver, in the webinar that I moderated. “I think it’s important to pay even more attention now.”
The advisors who attended the webinar agreed. Another live poll revealed that all of the advisors are being at least as meticulous as they were when the IRS was at full force, and nearly half say they are redoubling their diligence this tax season.
“We want to make sure everything is reconciled and correct the first time because the back and forth [with the IRS] has been a real pain,” added webinar panelist Stephanie Bucko of Mana Financial.
Another panelist, CPA Dan Hodgin of Silicon Valley Tax Group in the San Francisco Bay Area, explained the extra degree of due diligence he now takes with his clients’ tax returns. “I like to have access to all of my clients’ IRS online accounts, with power of attorney,” he told webinar attendees. “That lets me look in and see what the IRS has done or hasn’t done so that when I am corresponding, and I know there is going to be a big backlog, I can get a little more information a little faster.”
More Tax Resources
The webinar in which these experts spoke is available to stream on demand. It was held by myStockOptions.com, a leading online resource for all things relating to stock options, restricted stock units (RSUs), ESPPs, and other forms of equity compensation. The myStockOptions Tax Center has special resources for tax returns involving equity comp and stock sales, such as annotated diagrams of IRS forms. The website also has a taxation course offering continuing education credits.
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