Jessica I. Marschall, CPA November 20th, 2025
In recent months, I have seen a sharp increase in clients receiving automatic IRS collection notices, even when their cases were actively being worked, fully documented, or awaiting IRS action. These notices are not the result of taxpayer error. They are the predictable outcome of an agency operating with severe staffing shortages and a backlogged, fragmented processing system.
The most concerning pattern is this: The IRS simply does not have enough personnel to retrieve taxpayer faxes, update Social Security numbers for newborn dependents, finalize Offers in Compromise, or review Form 433-B financial statements. When no one is available to touch the file, the system defaults to automation, and automated enforcement notices go out.
I have had clients with pending resolutions, legitimate filings, or active casework who suddenly receive CP14s, CP501s, or CP504s because their supporting documents have not been retrieved, reviewed, or uploaded. These are not compliance failures by taxpayers. They are failures of the system caused by the absence of human staffing where human review is required.
This reality aligns with what former IRS commissioners themselves are now publicly acknowledging.
A Workforce Crisis with Real Consequences
According to several former IRS Commissioners speaking at the November 2025 AICPA National Tax Conference, the IRS has lost more than 25,000 employees since the beginning of 2025, representing more than one quarter of its workforce. As of May 2025, approximately 25,386 employees had separated from the agency through voluntary buyouts, deferred resignation programs, or other departures. This reduction is creating significant operational stress and undermining the agency’s basic functions.
Former Commissioner John Koskinen, who served from 2013 to 2017, warned at the conference that morale is low and that the next filing season will be difficult in large part because the IRS simply does not have the people to do the work. He noted that the remaining employees are dedicated professionals, but they are being asked to do far more with far fewer resources.
Former Commissioner Danny Werfel, who served from March 2023 to January 2025 and oversaw the creation of Direct File, emphasized that the agency’s inability to maintain modern systems, illustrated by the shutdown of Direct File, is symptomatic of deeper structural gaps. Werfel expressed doubt that the IRS could successfully modernize with reduced budgets and fewer experienced workers while simultaneously implementing massive changes from new tax legislation.
Former Acting Commissioner Doug O’Donnell, who served in that role twice during leadership transitions, noted that despite digital improvements, the backend of IRS processing still relies heavily on manual intervention. These are the very areas where staffing has collapsed. “Even if there’s a digital or an electronic front end, it all has to be done by a human being, and that takes time and effort and humans sitting at keyboards making these changes,” O’Donnell explained at the conference.
These insights directly match what practitioners are experiencing daily. Taxpayers who are complying, filing documentation, and responding promptly are still receiving automated enforcement notices because human review is stuck in limbo.
The National Taxpayer Advocate, Erin Collins, warned in her mid-year report to Congress that while the 2025 filing season was “largely successful” due to extensive advance work and the largest workforce in recent years, taxpayers may face significant challenges during the 2026 filing season. The report noted that with staffing cuts of more than 25%, particularly deep cuts to IT and enforcement, and the potential complexity from new tax legislation, the next filing season runs the risk of being severely compromised with poor taxpayer service, declining revenue collection, and loss of confidence in the agency.
The End of Direct File and Who Benefited from It
The IRS Direct File system, a free and simplified online filing platform, was discontinued in November 2025. The program allowed eligible taxpayers to file their federal tax returns directly with the IRS at no cost. It functioned much like the professional software used by tax practitioners and received overwhelmingly positive reviews from users.
Direct File began as a pilot program in 12 states for tax year 2023, when 140,803 returns were filed and accepted. For tax year 2024, the program expanded to 25 states and saw usage more than double, with 296,531 returns filed and accepted as of April 2025. According to internal IRS reports, 94% of users who completed an IRS survey rated their experience as “excellent” or “above average,” and 86% said their experience with the platform helped increase their trust in government. Many users reported completing their returns in under 30 minutes.
Despite this success and positive user feedback, the program was terminated. Treasury Secretary Scott Bessent, who was also serving as acting IRS Commissioner at the time, told reporters at the White House in November 2025: “I think that we have better alternatives, it wasn’t used very much, and we think that the private sector can do a better job.”
The Treasury Department’s report to Congress cited low participation (less than 0.5% of the approximately 146 million returns filed) and relatively high costs. The program cost at least $41 million to operate for tax year 2024, or approximately $138 per return, according to the report. Treasury recommended that the IRS focus instead on strengthening the existing Free File program, which is a partnership with private tax preparation software companies.
The termination was welcomed by only one group: companies whose profits depend on selling tax filing products. Major lobbying organizations, particularly those aligned with Intuit (the owner of TurboTax) and H&R Block, had vigorously opposed free government filing solutions. These companies are members of the American Coalition for Taxpayer Rights, a group that lobbied extensively against Direct File. Eliminating Direct File preserves revenue streams for private preparers and software companies, despite the fact that approximately 90 percent of taxpayers now take the standard deduction and do not require professional assistance for basic Form 1040 filings.
The irony is significant. While the IRS remains understaffed, overwhelmed, and unable to process routine submissions, taxpayers are being asked to pay private vendors for assistance they often do not need and could have accessed for free. As Adam Ruben of the Economic Security Project noted: “Trump’s billionaire friends get favors while honest hardworking Americans will pay more to file their taxes.”
The One Big Beautiful Bill Act, enacted in July 2025, included provisions directing the IRS to study alternatives to Direct File. House Ways and Means Committee Chairman Jason Smith defended the program’s termination, stating it was “unlawful for Democrats to expand the authority of the IRS without congressional authorization” and characterizing the program as “costly and ineffective.”
However, most of the Direct File team has left the government through the 2025 workforce reductions, either through resignations or separations, making any future revival of the program unlikely in the near term.
A Tax Code Too Large for Any Individual to Reasonably Navigate
The United States tax code exceeds 76,000 pages and continues to grow with legislation such as the One Big Beautiful Bill Act, tax court rulings, IRS memoranda, and ongoing sub-regulatory guidance. Even though most taxpayers file simple returns, they are still legally attesting that they have followed all tax laws contained within that enormous body of code.
This is an unreasonable burden for the average taxpayer and deeply problematic when the agency responsible for administering that code is functionally unable to process documents, answer phone calls, or correct records.
Where This Leaves Taxpayers
The cumulative effect is a perfect storm:
A shrinking IRS workforce that has lost over 25% of its employees since January 2025
Growing backlogs, particularly in paper return processing and amended returns
Manual processes with insufficient staff to complete them
Shutdown of user-friendly tools such as Direct File
Automated enforcement stepping in where human review should occur
Increased phone wait times and reduced appointment availability at local IRS offices
Taxpayers, especially low- and middle-income taxpayers, are left in the crossfire.
The system needs modernization, staffing stabilization, and technological investment. Without these, the IRS will remain a bottleneck rather than a facilitator of compliance. Taxpayers will continue to feel the consequences through unnecessary penalties, collection notices, and unresolved cases.
What Taxpayers Can Do Now
While systemic problems require systemic solutions, taxpayers can take some protective steps:
File electronically whenever possible to reduce processing times
Send all important documents via certified mail to document receipt
Keep detailed records of all correspondence with the IRS
Consider professional representation for complex matters
Respond promptly to all IRS notices, even if you believe they are incorrect
Use online tools such as the IRS Document Upload Tool when available
Be prepared for longer resolution times and reduced access to telephone support
The challenges ahead are substantial. Former Commissioner Werfel summarized it well when he said at the AICPA conference: “Even with 25,000 fewer employees and even with all the pressure, they are dedicated.” The problem is not the dedication of IRS employees. The problem is that there simply are not enough of them to do the work that needs to be done.
Sources
Accounting Today: Former IRS commissioners see challenges for beleaguered agency (November 18, 2025)
Journal of Accountancy: Is the IRS just between shutdowns? Former IRS commissioners are worried (November 18, 2025)
The Tax Adviser: IRS ends Direct File, shifts focus to Free File upgrades and private sector (November 18, 2025)
Federal News Network: IRS watchdog warns of tax filing challenges next year after agency cuts 25% of workforce (June 30, 2025)
Federal News Network: IRS tells states Direct File ‘will not be available’ in 2026 (November 2025)
Government Executive: Trump wants to reverse the staffing cuts he’s overseen for IRS customer service (July 25, 2025)
Treasury Inspector General for Tax Administration (TIGTA): Snapshot Report: IRS Workforce Reductions as of May 2025 (July 18, 2025)
Treasury Inspector General for Tax Administration (TIGTA): Snapshot Report: IRS Workforce Reductions as of March 2025 (May 2, 2025)
National Taxpayer Advocate Mid-Year Report to Congress (June 2025)
Tax Notes: IRS Shutters Direct File, Citing Cost and Low Uptake (November 6, 2025)
Accounting Today: IRS ends Direct File program (November 6, 2025)
The Tax Adviser: Will budget, staff cuts impede IRS modernization? Former commissioner weighs in (August 22, 2025)
