By Zaher Fallahi, CPA, MS, MBA
As the 2026 tax filing season approaches, recent oversight reports from the Treasury Inspector General for Tax Administration (TIGTA) and members of the U.S. Senate Finance Committee have raised operational concerns regarding IRS readiness.
For taxpayers in Los Angeles, Orange County, and nationwide, particularly those dealing with back taxes, amended returns, cryptocurrency reporting, or IRS notices, understanding these developments is important.
1. Staffing Reductions and Processing Backlogs
According to TIGTA’s January 26, 2026, memorandum
2026400002_Readiness Memo_Final
:
- The IRS workforce has declined approximately 19%
- Key filing-season programs lost approximately 17% of staff
- Individual return inventory increased from 871,000 pre-pandemic to approximately 2.0 million by December 2025
- The IRS paid more than $2.6 billion in interest during Processing Year 2025 due to delays
2026400002_Readiness Memo_Final
Increased inventories include:
- Amended returns (Form 1040X)
- Taxpayer correspondence
- Paper-filed tax returns
- Error resolution cases
For taxpayers with prior-year issues, IRS back taxes, or amended return filings, delays may extend resolution timelines.
2. Telephone and In-Person Service Impacts
TIGTA reports that the IRS plans to reduce its telephone “level of service” goal to 70%, compared to 85% in the prior filing season
2026400002_Readiness Memo Final
This may result in:
- Longer wait times
- Increased reliance on automated systems
- More difficulty reaching live representatives
Taxpayer Assistance Centers have also experienced operational fluctuations
Senate Democrats, TIGTA warn….
For individuals receiving IRS notices in Los Angeles or Orange County, relying solely on telephone contact may not be efficient.
3. Increased Reliance on Automation and AI
Members of the Senate Finance Committee have asked Treasury officials detailed questions regarding the IRS’s expanded use of artificial intelligence and automation tools
letter_to_acting_commissioner…b…
Their concerns include:
- Whether AI can replace experienced revenue agents in complex cases
- Whether audit selection may shift toward simpler, lower-dollar cases
- What safeguards exist to prevent disparities
letter_to_acting_commissioner_b…
At the same time, TIGTA notes delays in modernization efforts such as:
- Zero Paper Initiative
- Amended return automation
- Taxpayer 360 systems
2026400002_Readiness Memo Final
Technology modernization remains ongoing, but transitional inefficiencies are possible.
4. Practical Implications for 2026 Tax Preparation
For taxpayers seeking CPA tax preparation in Los Angeles or Orange County, the practical implications are straightforward:
✔ File early
✔ E-file instead of paper filing
✔ Ensure cryptocurrency transactions are properly reported
✔ Maintain documentation for deductions and credits
✔ Respond promptly to IRS notices
✔ Address unfiled years or back taxes proactively
Well-prepared electronic returns historically process faster than paper filings.
5. Measured Perspective
It is important not to overstate the situation. The IRS remains operational. Electronic filing infrastructure continues to function.
However, during periods of staffing transition and system modernization:
- Processing delays can increase
- Automated notice volume may rise
- Manual corrections may take longer
Careful compliance reduces unnecessary friction.
Neutral Disclaimer
This article is intended for informational and educational purposes only and does not constitute legal, tax, or accounting advice. Each taxpayer’s circumstances are unique. Taxpayers should consult a qualified Certified Public Accountant or other professional advisor regarding their specific situation.
Zaher Fallahi, CPA, MS, MBA
Los Angeles | Orange County | Nationwide
Tax Preparation • Back Taxes • Amended Returns • Cryptocurrency Reporting • IRS Notices