In the IR-2025-71, the IRS shared the mid year report to Congress and provided a summary of items. These items below indicate the areas of focus and improvement for the future:

  1. Status on the 2024 filing season
    1. The IRS received around 141 million return (processed 138 million – the difference might be bounced returns due to mismatch information like name and last name vs social security card name and last name). Additionally, around 13 million returns were suspended that is almost 1 out of 10 that requires additional review.
    2. Also, you should be aware that 62% resulted in refunds with average return just slightly short of three thousand dollars (many of the people entitled to a refund do not file – Americans miss around $1 billion in refunds each year).
  2. Identity theft is a main concern
    1. The IRS flagged around 2.1 million returns as potential identity theft.
    2. On average it takes almost 2 years to resolve identity theft cases and taxpayers to receive their money
    3. Also, this issue impacts disproportionately
      1. SOLUTION – Set up an IRS Identity Protection PIN
  3. Lack of personnel – Operating concern
    1. Overall, there is a 25% reduction of the IRS personnel. In certain departments, the majority of the staffing is out the door, such as 95% for the Transformation and Strategy Office, 90% for the Chief Tax Compliance Officer.
    2. Note that the department with the least amount of cuts is the Criminal Investigation Unit with only 10%
    3. Even if there is less personnel, many of these activities are being replaced by new technology like AI
  4. Focus on three IT projects
    1. Online accounts – As the current functionality is extremely limited, only around 10% of the taxpayers have created an account (note that some people that created it once either cannot access it or do not even remember how to use it). You might be able to check your transcripts or make payments, but you cannot respond notices or have a IRS agent chat with you.
    2. Digitalizing documents – In 2025, the IRS expects to receive 43 million paper tax returns and 19 million paper documents (in addition to the 170 million paper notices sent). If they could improve these communications electronically and encourage the use of the online accounts, efiling and the document upload tool, there would be a major shift on processing paper documents.
    3. Integrating own systems – Currently the IRS has over 60 case management system that do not integrate so the IRS agent has to go through several systems to search and find the answers. Considering that the IRS gets around 100 million calls a year, this could greatly reduce their response times.  Personally, my calls (without waiting time thanks to the tax practitioner and other tools, like private service to get ahead on the line) to the IRS might last from 45 minutes to an hour and a half dealing with one, two or three cases.

We’ll continue monitoring IRS developments and share timely updates to help you stay ahead. If you’d like to discuss how any of these changes might impact your business or individual tax situation, please reach out to our team.

Link IRS – National Taxpayer Advocate issues mid-year report to Congress