IRS Indicates Reverse Layoff Plans Amid Mounting Workforce Shortages
The IRS has indicated plans to reverse course on its earlier staffing reductions, which would allow some employees who had accepted incentives under the Deferred Resignation Program (DRP/TDRP) to rescind their separation agreements and return to work.
Why It Matters:
This would be a major reversal. After shedding approximately 26% of its workforce earlier this year, including mass buyouts and resignations, the agency now faces critical staffing shortages just ahead of tax season. The staffing gaps have already posed serious risks to IRS operations, including taxpayer services and modernizing initiatives.
Actionable Steps:
- Inform clients and internal teams that IRS staffing challenges may lead to delays in processing or customer support.
- Monitor developments closely for updates on re-hirings and organizational shifts.
- Adjust client expectations and planning timelines accordingly, especially around compliance, processing delays, or audit support services.
OBBBA Opens New Estate and Gift Planning Opportunities
The One Big Beautiful Bill Act (OBBBA) expanded estate and gift planning opportunities, including adjustments to exemption thresholds and planning flexibility. These provisions offer high-net-worth clients new avenues for wealth transfer and tax efficiency.
Why It Matters:
Estate planning is entering a critical window. Professionals who act early can help clients secure favorable tax treatment before thresholds potentially shift again in future years.
Actionable Steps:
- Identify clients who may now qualify for enhanced estate and gift strategies.
- Schedule planning conversations before year-end to lock in benefits.
- Partner with estate attorneys where needed to ensure coordinated planning.
The IRS Confirms No Changes to Information Returns or Withholding Tables for 2025
The IRS confirmed there will be no updates to information returns (W-2s, 1099s, etc.) or withholding tables for the 2025 tax year. Despite significant changes from the One Big Beautiful Bill, employers and tax professionals can breathe a sigh of relief knowing payroll reporting and withholding obligations remain stable.
Why It Matters:
Withholding changes create ripple effects across payroll processing, tax planning, and compliance systems. Stability means professionals can focus on advising clients on broader tax law shifts, like credits and deductions, without scrambling to retool software or processes.
Actionable Steps:
- Communicate to payroll clients that 2025 withholding and information return processes will remain unchanged.
- Proactively review client payroll systems for accuracy.
- Shift focus toward helping clients maximize credits.
IRS Leadership Shake-Up: Billy Long Out After Less Than Two Months
Billy Long was removed as IRS Commissioner after serving fewer than two months, marking the seventh leadership change in 2025. Treasury Secretary Scott Bessent is now acting commissioner as the agency faces workforce cuts and operational strain.
Why It Matters:
Leadership instability risks delayed guidance, shifting priorities, and inconsistent communication. For practitioners, it reinforces the importance of monitoring IRS updates closely and setting client expectations about potential delays.
Actionable Steps:
- Stay subscribed to IRS newsroom updates for the latest official guidance.
- Prepare clients for possible service delays in processing or communication.
- Remain proactive in documenting client interactions with the IRS to avoid gaps.
IRS Opens Applications for 2026 Compliance Assurance Process (CAP)
The IRS is accepting applications for the 2026 Compliance Assurance Process (CAP), a voluntary program where large corporate taxpayers work with the IRS to resolve tax issues before filing returns. The program fosters real-time compliance and reduces the risk of later disputes.
Why It Matters:
For large business clients, CAP provides certainty and efficiency. Tax professionals advising corporate clients should consider the benefits of early issue resolution and stronger transparency with the IRS.
Actionable Steps:
- Review CAP eligibility requirements with your corporate clients.
- Discuss the pros and cons of early issue resolution versus traditional post-filing audits.
- Consider CAP as a strategic compliance tool for risk-averse or audit-prone clients.