How IRS enforcement is quietly shifting from people to machines Today’s Coffee Break dug into what’s actually happening inside the IRS right now, why everything that needs a human is grinding to a halt, and at the same time why automated enforcement is ramping up. The IRS has been gutted (on purpose) - Since early 2025, IRS headcount has dropped from roughly 100,000–102,000 employees down to about 74,000 by the end of 2025, around a 27% reduction according to Yale’s Budget Lab. - There have been multiple leadership changes, including the unofficial “CEO” Bisignano, who functions like a commissioner but without actual Senate confirmation. - Morale inside the IRS is reportedly terrible, and anything that requires a human touching your file is painfully slow. - GAO reported about 2 million “open files” in the system at the end of 2025, and we’re seeing that in real life at Tax Sherpa with items sent in late 2024/2025 that still haven’t been processed. Customer service is so backlogged that the IRS temporarily reassigned about 1,500 IT and HR staff to phone and taxpayer service duty after a short training sprint, and now that “temporary” assignment has been extended. Human audits are collapsing - Headcount is at the lowest level since the 1960s, and there is internal talk of cutting it further to around 50,000. - Audits for high-income individuals, partnerships, and large corporations are down about 31% by mid‑2025. - The Global High Wealth office lost roughly 38% of its staff in the early weeks of Trump’s term, and Criminal Investigation has also been heavily reduced. - Total completed audits are down to about 497,000 a year, under 30% of the prior 1.7 million average, implying roughly a 70% drop in people‑driven audit activity. - Yale Budget Lab projects roughly $600 billion of lost revenue over 10 years from reduced enforcement, which is basically a rounding error at federal budget scale. So, on the human side, enforcement is much weaker. But that does not mean enforcement overall is weaker.

Hey Tax Sherpa community! Just wrapped up today's live Coffee Break (technically Tea Break with Earl Grey today ☕). We dove into two big updates: the reignited push for Senate Bill 798 on indexing capital gains to inflation (check out my free tool at gains.hiddentaxcost.com to see the hidden tax drag from inflation ), and President Trump's new executive order on TrumpIRA.gov expanding savers match contributions up to $1,000 for retirement starting 2027. Grab your drink, relax, and catch up on the tax/business news you need. Full transcript below, plus the video recording attached for the full experience.

I sent out an email about this already and hopefully you saw it. In case you didn't, here is a new tool I created to show how much tax you're paying on inflation when you sell stocks, real estate, or business assets. https://gains.hiddentaxcost.com/ Right now this is gaining traction in the media again because, even though this proposal to adjust a cost basis to account for inflation has been around for over ten years, it's gained renewed traction because the Republicans are concerned about their performance in the midterm elections coming up in a few months. I personally got radicalized on this topic when I saw a client have to pay tens of thousands of dollars on a property sale. When I did this inflation adjustment calculation manually, it came out to be a break-even transaction. The house was bought 20 years ago and it was a whole lot of money back then. Twenty years go by, the property is sold, and there’s a sizeable nominal capital gain. In real terms, after adjusting for inflation, it was basically break-even. All of this tax that was paid is basically an infinite tax rate because the gain was zero. You have to pay taxes on current dollars, even though the money that was spent 20 years ago on the purchase was eroded over time. So I'm all in favor of this type of proposal being passed as it will at least somewhat more accurately reflect the reality of the investment impact. Feel free to use the gains calculator tool to find out how much inflation tax you're paying on a sale you might have already had, or one you might be considering.

https://www.skool.com/tax-strategy-network/classroom/a137574b?md=472f8049924b4c05a788109841c675a7 This is very much a work in progress but I am starting to compile a resources module in the classroom so that you can find templates, education pieces, and implementation along with software tools that I have already developed or that are being developed. Keep an eye on it for updates.