Key Takeaways
- Treasury’s funding is set to continue past January.
- The IRS budget is being slashed again.
- The budget cuts and staffing changes come as filing season begins.
- Government revenue drops as companies claim retroactive OBBBA tax benefits.
- New GOP tax bill faces internal skepticism.
As Washington braces for what looks to be a once-in-a-decade snowstorm this weekend, it’s also keeping a close eye on the slow-moving appropriations process.
Despite the approaching deadline of Jan. 31 to keep government agencies funded, it looks like Congress will manage to avoid even a partial shutdown this go-around, so long as the cold doesn’t keep lawmakers from voting. Taxpayers will probably be able to file their tax returns without worrying that the Internal Revenue Service is shuttered and unable to provide help, after the House of Representatives voted 314-79 last week to pass a funding measure which includes the Department of the Treasury.
The IRS survived this negotiating round, but not unscathed. The bill will cut the agency’s funding by nearly 10 percent from the 2025 level, and a separate funding bill passed Thursday by the House rescinds $11.6 billion in funding that had been set for modernization by the Inflation Reduction Act in 2022.
Between previous cuts in spending agreements hammered out between Republicans and Democrats—as well as what the agency spent to stay open for part of last year’s government shutdown—the $80 billion in IRA funding for increased enforcement and modernization efforts has dwindled to less than $10 billion, according to the Bipartisan Policy Center. And according to the Congressional Budget Office, this latest $12 billion cut will, if enacted, reduce federal revenue by $38.6 billion over the next 10 years, due to fewer enforcement actions.
“This agreement will further reward non-compliance and fraud, and it will deny taxpayers the technological upgrades and improved experience that they deserve,” said New York University Tax Law Center Senior Fellow Greg Leiserson in a released statement.
These new cuts come as the agency deals with filing season and implementation of the One Big Beautiful Bill Act, as well as more staffing turmoil. Guy Ficco, a longtime agency official and current criminal division chief, announced his retirement on Tuesday, leading to more reshuffling of IRS leadership. Following the departure of Trump’s first IRS appointee, former Rep. Billy Long, the agency does not have a permanent commissioner, with Social Security Administration Commissioner Frank Bisignano also serving as IRS “Chief Executive Officer,” a new position created by the administration.
Tax practitioners will be paying close attention over the next few months to see how much these issues are affecting the agency’s core mission.
Recent Tax Pieces:
A Giant Tax Bill Again Sparks Huge Drop-Off in Corporate Taxes – Doug Sword, Tax Notes ($):
Republicans say the plan in passing the One Big Beautiful Bill Act (P.L. 119-21) was always to put cash into business coffers while rewarding investments through tax code changes. The bill allows businesses to use 100 percent bonus depreciation to write off many expenses incurred since President Trump’s January 20, 2025, inauguration, along with R&D costs, and to take expanded net interest expensing since January 1, 2025.
Key Lawmakers Question Another Partisan Big Tax Bill – Zach C. Cohen, Bloomberg Tax ($):
One tax writer in House leadership, Rep. Blake Moore (R-Utah), predicted technical fixes to the last mega tax law would be the most likely revenue measure to craft another budget reconciliation package after locking in so many of their tax cut priorities last year.
Tax Pros Warn Of Turbulent 2026 Filing Season Ahead – Asha Glover and Stephen K. Cooper, Law360 Tax Authority ($):
The 2026 tax filing season opens Monday and runs through April 15. The Internal Revenue Service expects to receive about 164 million individual income tax returns, predicting that most taxpayers will file electronically, according to a Jan. 8 announcement. The agency is committed to improving on last year's tax filing season, delivering on the promise of the 2025 GOP budget law to drive economic growth for businesses and consumers, acting Internal Revenue Commissioner Scott Bessent and IRS CEO Frank Bisignano said ahead of the opening.
Those assurances aren't persuasive to several tax professionals, who expect problems given the agency's ongoing leadership changes, smaller budgets and loss of experienced staffers just as new provisions to the code from last year's tax law take effect.
IRS Leader Shake-Up Bleeds Criminal, Civil Enforcement Oversight – Erin Slowery, Bloomberg Tax ($):
“The thing that you hope doesn’t happen is that the sensibility of somebody who deals with criminal tax will bleed into their point of view when they are managing the bulk of their enforcement, which is civil,” said Rochelle Hodes, a principal at Crowe LLP.
The Road Ahead for Energy Credits in 2026 – Marie Sapirie, Tax Notes ($):
Make a habit of sustained success.
