Lawmakers in the House of Representatives propose more significant reductions in IRS funding than what President Trump suggested.
Headline: IRS Faces Challenges and Funding Cuts in Upcoming Fiscal Year
The House Appropriations Committee has advanced a financial services and general government funding bill for fiscal 2026, which includes significant changes for the Internal Revenue Service (IRS). The bill, if passed, will give the IRS a $9.5 billion budget next year, a 23% cut from current spending levels.
One of the most controversial aspects of the bill is the potential elimination of Direct File, a free, online tax filing platform launched by the IRS last year. The IRS launched a congessionally mandated survey last month, asking taxpayers for their thoughts on Direct File, as well as possible private-sector alternatives. If the bill is passed, Direct File would be discontinued unless it receives approval from Congress to continue the program. Approximately 300,000 individuals used Direct File to submit their federal tax returns this year.
Republican lawmakers have repeatedly sought to eliminate Direct File, with critics saying it competes with software from tax-preparation companies and that the IRS spent tens of millions of dollars to launch the platform. However, users gave Direct File higher scores this year, compared to 2024.
The IRS is also facing a significant staffing shortage. The National Taxpayer Advocate warned Congress in June that taxpayers may face challenges during next year's filing season due to the loss of more than a quarter of the IRS's employees under the Trump administration. The spending bill requires the IRS to provide quarterly updates to Congress on its level of spending and how many full-time employees are working in each of its divisions.
The IRS may only be able to answer 16% of calls during next year's tax filing season, and only 11% of all calls in fiscal 2026, if the requested funds are not provided. The IRS is closing nine taxpayer assistance centers across the country, including locations in Altoona, Pennsylvania; Wilkes-Barre, Pennsylvania; Cedar Rapids, Iowa; Elmira, New York; West Nyack, New York; Owensboro, Kentucky; Paducah, Kentucky; Walnut Creek, California; and Wheeling, West Virginia.
The IRS tapped into its multi-billion-dollar modernization fund in the Inflation Reduction Act to reopen 54 taxpayer assistance centers in fiscal 2023. However, a report last month from the Treasury Inspector General for Tax Administration shows the IRS has spent a small fraction of the billions of dollars in modernization funds still available under the Inflation Reduction Act.
The Trump administration in June proposed giving the IRS $9.8 billion in FY 2026, about a 20% cut from current spending levels. House lawmakers rejected the Trump administration's request for more than $850 million to help the IRS hire an additional 11,000 call center representatives and roll out new automation tools.
The spending bill also zeros out funding for IRS business systems modernization. This could have far-reaching implications for the IRS's ability to modernize its outdated technology and improve its efficiency.
Enforcement would see an especially severe cut under the House spending bill, with 45% less funding next year compared to current spending levels. This could make it difficult for the IRS to collect taxes from delinquent taxpayers and could lead to a growing tax gap.
The exact number of IRS employees allocated by department that must be disclosed to the House Appropriations Committee as specified in the budget law is not detailed in the available search results. However, it is clear that the IRS is facing significant challenges in the upcoming fiscal year, and the spending bill could exacerbate these problems unless changes are made.
Read also:
- Understanding Hemorrhagic Gastroenteritis: Key Facts
- Stopping Osteoporosis Treatment: Timeline Considerations
- Trump's Policies: Tariffs, AI, Surveillance, and Possible Martial Law
- Expanded Community Health Involvement by CK Birla Hospitals, Jaipur, Maintained Through Consistent Outreach Programs Across Rajasthan
