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Call 214-214-3000If you owe the IRS money or are dealing with business tax issues, the next 12 months could be more challenging than any period in recent IRS history. And most taxpayers have no idea what's coming.
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Why IRS Changes for 2025-2026 Is One of the Most Significant IRS Transition Periods in Years
We're not talking about minor administrative adjustments or routine policy updates. The changes hitting the IRS right now represent a perfect storm of operational upheaval that will directly impact every taxpayer, especially those who owe back taxes or are navigating IRS audits, payment plans, or resolution strategies.
Three major shifts are converging simultaneously:
- The complete phase-out of paper refund checks (starting September 30, 2025)
- Sweeping tax law changes under the One Big Beautiful Bill Act affecting deductions, credits, and taxpayer responsibilities
- Massive IRS workforce reductions (25% of staff eliminated) combined with new AI technology implementation
Here's what this means for you: If you're waiting for a refund that you're counting on to pay other debts, if you're in the middle of negotiating an Offer in Compromise, or if you're dealing with collection notices, these changes could result in penalties, delays, lost refunds, and missed deadlines that make your situation significantly worse.
This isn't hyperbole. According to the National Taxpayer Advocate, the IRS faces "operational risks" during the 2026 filing season that could lead to severe service disruptions. Meanwhile, new payment modernization requirements could catch millions of taxpayers completely off guard.
Let's break down exactly what's changing, what it means for people who owe taxes, and most importantly what you need to do right now to protect yourself.
Key IRS Changes Impacting Tax Debtors in 2025-2026
These aren't minor tweaks to forms or filing procedures. Each of these changes has real, tangible consequences for taxpayers dealing with tax debt, collection actions, or IRS disputes.
The End of Paper Refund Checks: More Complicated Than You Think
On March 25, 2025, President Trump signed Executive Order 14247, which mandates that the U.S. Department of the Treasury phase out all paper check disbursements by September 30, 2025. For the IRS, this means that starting with the 2026 filing season (when you file your 2025 tax returns), paper refund checks are essentially gone.
According to the IRS announcement, all refunds will be delivered electronically through direct deposit, prepaid debit cards, or digital wallets.
Why this matters for tax debtors: If you owe back taxes and are expecting a refund from a different tax year, the IRS can now intercept and redirect those funds electronically faster than ever before. Additionally, if your banking information is incorrect or outdated, your refund could be significantly delayed, with no paper check backup option available.
Critical Statistics You Need to Know:
- Paper checks are 16 times more likely to be lost, stolen, altered, or delayed compared to electronic payments (per the IRS)
- During the 2025 filing season, only 6.5 million taxpayers (about 7% of filers) still received paper checks
- Electronic refunds are issued in less than 21 days if you file electronically and choose direct deposit, while paper checks used to take 6+ weeks
- Exceptions will be available for taxpayers without banking access, but the process for requesting exceptions is still being finalized
What happens if you don't provide direct deposit information? According to the National Taxpayer Advocate, taxpayers who don't provide bank account details or request an exception for 2025 returns will face refund delays. The IRS will send a direct deposit request letter with information on how to update your banking information or request an exception.
Proactive Step: If you're expecting any kind of refund in 2026 or beyond, verify your direct deposit information with the IRS NOW. You can update your information through your IRS online account. This feature is expected to be available before the 2026 filing season begins.
Legislative Earthquake: The One Big Beautiful Bill Act
Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) represents the most significant tax code overhaul since the Tax Cuts and Jobs Act of 2017. While many provisions provide tax cuts and increase refunds for some taxpayers, the complexity of these changes creates confusion and compliance challenges, particularly for those already dealing with tax debt.
Major OBBBA Changes Affecting Taxpayers in 2026:
- Permanent tax rates and brackets: The seven tax brackets from the TCJA (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent, with additional inflation adjustments for the 10% and 12% brackets
- Increased standard deductions: $16,100 for single filers, $32,200 for married filing jointly in 2026 (per IRS guidance)
- Enhanced child tax credit: $2,200 per child in 2025, indexed to inflation starting 2026
- SALT cap expansion: State and local tax deduction cap increased to $40,400 for most taxpayers (from the previous $10,000 cap)
- Senior deduction: New $6,000 deduction for individuals 65 and older (effective 2025-2028)
- Tip and overtime income exemptions: Temporary provisions exclude certain tip and overtime income from taxation
- Estate tax exclusion: Increased to $15 million per person in 2026 (up from $13.99 million in 2025)
The Compliance Trap: According to tax planning experts, the retroactive nature of some OBBBA provisions (applying to 2025 tax year) means many taxpayers had their withholding wrong all year. The Tax Foundation estimates this could result in $100 billion in higher refunds across all taxpayers, but it also means some people who thought they were withholding correctly may now face unexpected balances due.
What This Means for Tax Debtors:
- Changing obligations: If you're on an installment agreement or have a payment plan, your ongoing tax obligations might change under OBBBA, potentially affecting your ability to remain compliant
- Refund intercepts: If you're expecting a larger refund due to OBBBA changes, but you owe back taxes, the IRS will intercept that refund to offset your debt
- Confusion and mistakes: The complexity of OBBBA increases the likelihood of filing errors, which can trigger audits or correspondence from the IRS
IRS Operational Meltdown: Workforce Cuts and Technology Growing Pains
Here's the part that should genuinely concern you: At the exact same time that the IRS is implementing massive policy changes and modernizing payment systems, the agency has lost 25% of its workforce.
According to the Treasury Inspector General for Tax Administration (TIGTA), between January and May 2025, IRS employment dropped from approximately 103,000 employees to just 77,000. That's 26,000 people gone in four months.
Which departments were hit hardest?
- Information Technology: 27% reduction (losing critical expertise in system modernization)
- Taxpayer Services: 22% reduction (9,000+ employees who answer phones and process returns)
- Return Integrity and Compliance Services: 18% reduction (the team that detects and prevents fraudulent refunds)
TIGTA estimates that fraud detection staff cuts alone could result in nearly $360 million in fraudulent refunds that won't be stopped during the 2026 filing season.
Translation: Fewer people to answer phones, longer wait times, delayed responses to correspondence, slower processing of payment plans, and increased errors in case handling.
AI to the Rescue? Maybe. Maybe Not.
To compensate for workforce reductions, the IRS is rolling out Salesforce's Agentforce AI technology across multiple divisions, including the Office of Chief Counsel, Taxpayer Advocate Services, and the Office of Appeals.
According to Salesforce executives, these AI agents are designed to handle tasks like case summarization and data searches to help overworked IRS staff process requests more efficiently. However, the technology comes with "a lot of guardrails" and is not authorized to make final decisions or disperse funds.
The Problem: AI systems are still learning. They can't interpret complex tax situations, don't understand nuance, and can't advocate for taxpayers the way an experienced IRS employee would. As one current IRS employee told reporters: "Systems break and it takes days to fix them because no one is left who knows how. The guy who knows how to fix it is gone."
What this means for you: If you're negotiating an Offer in Compromise, dealing with Trust Fund Recovery Penalties, or trying to resolve a tax lien, you're likely facing significantly longer resolution times and less personalized attention than in previous years.
Additional Operational Challenges:
- Phone service degradation: The IRS answered 87% of calls during the 2025 filing season with an average wait time of 3 minutes. Without additional funding, the IRS projects it will only answer 16% of calls during the 2026 filing season, and only 11% of all calls in fiscal 2026
- Identity theft resolution delays: The National Taxpayer Advocate reports the IRS is dealing with identity theft cases "at a glacial pace," and workforce cuts will only make this worse
- Modernization delays: Many IT modernization projects have been paused or slowed as the agency "resets and reassesses" its technology priorities
What These Changes Mean for People Who Owe Taxes
If you're dealing with tax debt, these aren't abstract policy discussions. Every single one of these changes creates real, tangible problems that can make your situation worse. Let's tie each change to specific pain points you might face.
Higher Audit Risk in a Reduced-Capacity Environment
Here's the paradox: The IRS has fewer auditors, but they're also implementing AI-driven audit selection tools designed to identify discrepancies more efficiently.
According to TIGTA reports, the IRS's current audit selection models result in a high percentage of examinations that conclude with no changes to taxpayers' liability, meaning the agency is auditing compliant taxpayers while missing actual issues. The new AI models are designed to be more accurate, which means:
- If you make a mistake on your return, AI is more likely to catch it
- If you're already in the IRS system for owing back taxes, you're a higher-priority target
- If you're trying to resolve tax debt while also dealing with current-year compliance, any errors could derail your resolution efforts
The silver lining: With AI handling audit selection and fewer human auditors available, many ongoing audits are being cancelled mid-process because staff members were laid off and there's no one to continue the work. However, you shouldn't count on this. Better to be proactive.
Delayed Responses That Miss Deadlines
Every IRS notice comes with a deadline. Miss that deadline, and your options for resolution shrink dramatically. With 22% fewer taxpayer service employees and only 16% of phone calls being answered, you might:
- Not get a response to your correspondence within the required timeframe
- Miss the window to request Collection Due Process hearings
- Have difficulty submitting required financial documentation for payment plans or OICs
- Be unable to reach anyone to resolve discrepancies before enforcement actions begin
And here's the brutal truth: The IRS is not required to extend deadlines simply because they're understaffed. If you miss your deadline to respond to a final notice of intent to levy, the levy can proceed regardless of whether you were able to get through on the phone.
Incorrect Addresses and Missed Refunds in the Electronic Era
With the paper check phase-out, the IRS is relying entirely on the accuracy of your banking information and mailing address on file. If either is wrong:
- Electronic refunds can be deposited into the wrong account (and good luck getting that money back quickly)
- IRS notices might go to an old address, and you'll never see them until enforcement action begins
- Correspondence about your tax debt could be returned as undeliverable, and the IRS will proceed with collection assuming you're ignoring them
According to the IRS guidance on direct deposit, if you provide incorrect banking information, your refund will be rejected by the bank and the IRS will eventually issue a paper check (but this creates delays of weeks or months). However, starting in 2026, the paper check fallback may not be available or could take even longer to process.
The Perfect Storm for Payment Plan Defaults
If you're currently on an IRS installment agreement, these changes create multiple failure points:
- Tax law changes under OBBBA might affect your ability to remain current on ongoing tax obligations
- Delayed IRS responses could prevent you from modifying your payment plan when your financial situation changes
- System errors or processing delays might incorrectly show you as non-compliant
- Electronic payment issues could result in missed payments if your bank account changes
And if you default on an installment agreement? The IRS can immediately begin levy actions, and good luck getting through on the phone to resolve it.
This is exactly why professional representation matters. When you work with tax resolution specialists like IRSProb, we maintain direct lines of communication with IRS personnel, can respond to correspondence on your behalf, and ensure deadlines are never missed.
Case Examples & Real-World Scenarios
Let's look at some illustrative scenarios (details changed to protect confidentiality) showing how these IRS changes could play out for real taxpayers.
Scenario 1: The Refund That Never Arrived
The Situation: Maria owes $18,000 in back taxes from 2022-2023. She's been making payments through an installment agreement and was expecting a $4,500 refund for her 2024 tax return, which she planned to apply toward her balance.
However, Maria recently moved and forgot to update her address with the IRS. She also didn't have direct deposit set up because she's always received paper checks.
What Happened: Under the new electronic payment requirements, the IRS sent correspondence to her old address asking for updated direct deposit information. Maria never received the letter. Her refund was held in limbo while the IRS attempted to process it electronically without valid banking information.
Meanwhile, because Maria was counting on that refund to make progress on her back taxes, she couldn't make a large payment she had planned. The IRS sent her a notice (to the wrong address) about her payment plan potentially being in default due to insufficient overall progress toward resolving her liability.
By the time Maria realized what was happening (when she tried to check her refund status online), she had missed multiple deadlines and her installment agreement was in jeopardy.
The Lesson: Even seemingly small administrative oversights (outdated address, no direct deposit) can cascade into major problems when combined with IRS operational challenges and new payment rules.
The Solution: If Maria had worked with IRSProb.com from the beginning, we would have:
- Ensured all contact information was up to date with the IRS
- Set up direct deposit information before the 2026 filing season
- Monitored her account for correspondence and refund status
- Responded immediately to any IRS notices on her behalf
- Protected her installment agreement from default
Scenario 2: The Offer in Compromise Caught in Limbo
The Situation: David submitted an Offer in Compromise in March 2025, offering to settle his $45,000 tax debt for $12,000 based on his financial hardship. His OIC was assigned to an IRS examiner who was conducting the review.
What Happened: During the massive workforce reductions in May 2025, David's assigned examiner accepted the deferred resignation offer and left the IRS. David's OIC case was supposed to be reassigned to another examiner, but with 25% fewer employees, there was a significant backlog.
David called the IRS multiple times trying to get status updates, but with only 16% of calls being answered and wait times exceeding an hour, he couldn't get through. He sent written correspondence, but with Taxpayer Services staff reduced by 22%, his letters sat in a processing queue for months.
Meanwhile, OBBBA tax law changes went into effect, potentially affecting his financial situation analysis. David wasn't sure if he needed to update his OIC application to reflect the new tax rules, and he couldn't reach anyone at the IRS to ask.
His OIC languished in the system for 9 months with no resolution, all while he was prohibited from making other arrangements for his tax debt (since OIC submission pauses collection actions).
The Lesson: Complex IRS processes like OICs require continuous monitoring and advocacy. In a reduced-capacity IRS environment, cases can fall through the cracks for months.
The Solution: IRSProb's tax resolution specialists have direct channels for communication with IRS personnel that bypass standard phone queues. We can:
- Track your case status through practitioner priority lines
- Ensure timely responses to IRS information requests
- Update your OIC application when tax law changes affect your analysis
- Advocate aggressively when cases are delayed or stalled
- Explore alternative resolution strategies if your OIC is taking too long
Scenario 3: The Trust Fund Recovery Penalty in an AI Era
The Situation: Jennifer was a bookkeeper for a small business that closed in 2024. The business had unpaid payroll taxes totaling $38,000. In November 2025, Jennifer received notice that the IRS was proposing to assess a Trust Fund Recovery Penalty (TFRP) against her personally for $26,000.
Jennifer had never been an owner or officer of the company, just an employee who processed payroll at the owner's direction. She believed she shouldn't be held personally liable because she didn't have authority to decide which creditors got paid.
What Happened: Jennifer tried to respond to the TFRP notice on her own, submitting a written explanation of her employment role and lack of decision-making authority. However, her response was processed by the IRS's new AI system, which was programmed to look for specific keywords and documentation formats.
Because Jennifer's letter didn't match the AI system's expected format (and because she didn't know to submit specific supporting documents like job descriptions, corporate resolutions, or financial records showing she wasn't a responsible party), the AI flagged her response as "insufficient" and recommended proceeding with the penalty assessment.
A human reviewer might have recognized Jennifer's legitimate defense and requested clarifying information. But with IT staff reduced by 27% and increased reliance on automation, no human carefully reviewed her case before the penalty was assessed.
Now Jennifer owes $26,000 personally, has a tax lien filed against her property, and faces potential levy actions.
The Lesson: AI-driven IRS systems require precise formatting, specific documentation, and strategic presentation of your case. The "human judgment" factor that might have worked in your favor is increasingly absent.
The Solution: TFRP cases are complex and high-stakes. IRSProb's CPAs and tax attorneys know exactly:
- What documentation the IRS (and its AI systems) need to see
- How to format responses to meet automated screening criteria
- Which IRS personnel to escalate to when automated systems produce incorrect results
- How to appeal TFRP assessments through Collection Due Process hearings
- What defenses are most likely to succeed in your specific situation
Your Action Plan: What to Do Right Now
Don't wait until you're in crisis mode. Here's exactly what you need to do to protect yourself during this IRS transition period.
Immediate Actions (Do This Week)
- Verify your IRS contact information: Make sure the IRS has your current address and phone number. You can update this through your IRS online account or by filing Form 8822
- Set up or verify direct deposit information: Even if you're not expecting a refund, set this up now for future compliance. The IRS will roll out a tool in their online account system before the 2026 filing season
- Check your tax account transcript: Request your account transcript to see if there are any unresolved issues or pending actions
- Review your withholding: Use the IRS Withholding Estimator to ensure you're withholding correctly under the new OBBBA tax rules
If You Owe Back Taxes (Do This Month)
- Request a complete account analysis: Get a comprehensive review of exactly what you owe, including penalties, interest, and the Collection Statute Expiration Date
- Review your current payment plan: If you're on an installment agreement, make sure you're current and that your payment method is reliable
- Explore resolution options NOW: Don't wait for enforcement actions. Consider whether an Offer in Compromise, penalty abatement, or other strategy might be appropriate
- Respond to ALL correspondence immediately: With IRS staffing challenges, missing a deadline could result in your case stalling for months
If You're Facing IRS Collection Actions
- Act before they levy: Once the IRS issues a levy, your options narrow considerably
- Request a Collection Due Process hearing: You have the right to appeal, but you must act within the deadline on your notice
- Document everything: Keep copies of all correspondence, proof of mailing, and notes from any phone conversations
- Consider professional representation: The complexity of navigating IRS bureaucracy during this transition period makes professional help more valuable than ever
Critical Warning: The IRS is not going to pause enforcement actions because of staffing shortages or system modernization. Collection activities will continue, potentially with less human oversight and more automated decision-making. This makes proactive resolution more important than ever.
Why Professional Support Matters More Than Ever
In a normal year, many taxpayers can handle straightforward IRS issues on their own. But 2025-2026 is not a normal year. The convergence of massive policy changes, operational upheaval, and new technology implementation creates a perfect storm where professional expertise becomes essential.
Here's what IRSProb.com provides that you simply cannot do on your own:
Direct Access to IRS Personnel
While individual taxpayers face hour-long hold times and only 16% of calls answered, enrolled agents, CPAs, and tax attorneys have access to practitioner priority service lines that dramatically reduce wait times. We can:
- Reach IRS representatives when you can't get through
- Track the status of your case through internal IRS systems
- Escalate issues to supervisors when needed
- Communicate directly with the personnel assigned to your case
Getting Your IRS Transcripts and Reviewing Liability
Many taxpayers don't actually know the full extent of their tax liability. They know they owe "something," but they're not sure about:
- Penalties vs. tax vs. interest breakdown
- Which tax years are involved
- Whether penalties were assessed correctly
- How close they are to the Collection Statute Expiration Date
- Whether there are unfiled returns creating additional liability
We obtain and analyze your complete IRS account transcripts to give you a clear picture of exactly where you stand. This is the foundation of any resolution strategy.
Negotiating Payment Plans and Penalty Abatement
The IRS offers multiple resolution options, but knowing which one is appropriate for your situation requires expertise:
- Installment Agreements: We can negotiate payment plans that fit your budget, including partial payment installment agreements that might result in some debt being written off when the collection statute expires
- Offers in Compromise: We prepare comprehensive OIC applications with the documentation and financial analysis required for approval
- Penalty Abatement: Many penalties can be reduced or eliminated through first-time penalty abatement or reasonable cause arguments
- Currently Not Collectible Status: If you truly can't afford to pay anything, we can demonstrate this to the IRS and halt collection actions
Representing You Before the IRS
When you give us Power of Attorney (Form 2848), we become your authorized representative. This means:
- All IRS correspondence comes to us, not you
- We respond to notices on your behalf
- We handle all phone calls and meetings with the IRS
- We protect your rights throughout the process
- We ensure all deadlines are met
This is especially valuable during the current IRS transition period, when correspondence delays and communication breakdowns are more common.
Avoiding Common Pitfalls That Lead to Enforcement Actions
Most taxpayers don't realize how many small mistakes can derail their resolution efforts:
- Missing deadlines on correspondence (even by one day)
- Providing incomplete financial information for payment plans or OICs
- Making incorrect legal arguments in penalty abatement requests
- Failing to remain current on ongoing tax obligations while resolving back taxes
- Not understanding when you have the right to appeal
We've seen countless cases where taxpayers tried to handle things themselves, made one of these mistakes, and ended up in a much worse position than they started. Don't let that be you.
Real Results: Our clients at IRSProb have successfully resolved millions of dollars in tax debt through Offers in Compromise, payment plans, penalty abatements, and other strategies. We handle everything from IRS audits to levy releases to Trust Fund Recovery Penalty defense.
Experience Navigating IRS Operational Challenges
Because we work with the IRS every single day, we understand:
- How to navigate the new AI-driven systems
- Which IRS offices are experiencing the most significant delays
- How to escalate cases that are stalled due to staffing issues
- What documentation formats work best with automated screening systems
- How OBBBA tax law changes affect various resolution strategies
- How the paper check phase-out impacts refund offsets and payment plans
This real-time knowledge of IRS operations is something you simply cannot get from online research or general tax advice.
Don't Wait Until It's Too Late: Get Expert Help With Your Tax Debt Now
The IRS changes happening in 2025-2026 aren't going to slow down. Paper checks are being phased out. New tax laws are taking effect. The agency is operating with 25% fewer employees. And AI systems are making more decisions with less human oversight.
If you owe back taxes, are facing IRS collection actions, or are dealing with any, this is not the time to wait and hope things get better on their own.
At IRSProb.com, we help people just like you every single day:
- Taxpayers who can't get through to the IRS on the phone
- Business owners dealing with Trust Fund Recovery Penalties
- Families facing wage garnishments and bank levies
- People who tried to resolve their tax debt on their own and made it worse
- Anyone who needs professional representation before the IRS
We offer:
- ✅ Free initial consultations to review your situation
- ✅ Complete IRS account analysis and liability review
- ✅ Strategic planning for Offers in Compromise, payment plans, and other resolutions
- ✅ Full representation before the IRS (we handle all communication)
- ✅ Penalty abatement requests and appeals
- ✅ Protection from IRS enforcement actions
The bottom line: The IRS is not going to cut you slack because of their operational challenges. Deadlines still matter. Collection actions still proceed. And your tax debt still accrues penalties and interest every single day.
But with the right professional help, you can navigate these changes, protect your rights, and resolve your tax debt on terms you can actually manage.
Call us today for a free consultation:
🔗 Visit www.irsprob.com
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Don't let IRS changes make your tax problems worse. Get expert help today.
