by Nicholas Ballasy
As of May 2025, the IRS had lost more than 25% of its mission-critical enforcement staff, including auditors who handle complex high-wealth cases. As a result, operational problems abound in the watchdog of the public fisc.
The Internal Revenue Service (IRS) hasn’t implemented most of the Government Accountability Office’s “priority recommendations” and is still struggling with deep-rooted operational problems, according to a new report released publicly this week.
“GAO identified 30 priority recommendations for the Internal Revenue Service (IRS). Since then, IRS has implemented five of those recommendations by designating a dedicated unit for addressing business identity theft fraud and assessing how online services may reduce taxpayer burden, among other things,” the GAO said.
“In addition, GAO removed one recommendation related to reporting by third-party service providers, because it no longer warrants priority attention.”
In a letter to Acting IRS Commissioner Scott Bessent, Comptroller General Gene Dodaro highlighted urgent areas in need of attention, including the widening tax gap, taxpayer services, and cybersecurity. The GAO flagged 26 open high-priority recommendations and 204 other open recommendations that remain unresolved.
Inflation Reduction Act of 2022 goals severely curtailed
The IRS is attempting to reorganize even as the office responsible for leading its long-term modernization was recently dissolved, the report said. The report noted that billions in Inflation Reduction Act of 2022 funding originally meant to overhaul the agency’s technology, enforcement capacity, and customer service operations has been largely rescinded by subsequent legislation, leaving the agency with less than half of what was originally appropriated.
GAO urged the IRS to ensure it is following established best practices for agency reform, including setting clear goals, consulting Congress, and assessing workforce needs.
The report underscores persistent concerns about the federal tax gap, which is the difference between what taxpayers owe and what they pay on time, which has kept enforcement of tax laws on GAO’s High-Risk List for more than three decades.
IRS lost 25% of enforcement staff
As of May 2025, the IRS had lost more than 25% of its mission-critical enforcement staff, including auditors who handle complex high-wealth cases. GAO reiterated that the IRS still lacks a hiring and training strategy for rebuilding that workforce and has yet to develop methods to evaluate whether its audit-selection models are working as Congress intended.
Large partnerships, which are a growing and increasingly sophisticated business structure, remain rarely audited. GAO said even modest gains in auditing these entities could bring in "millions of dollars of revenue."
Sole proprietors, another major driver of the tax gap, also remain a challenge. GAO faulted the IRS for refusing to create dedicated strategies tailored to that group.
"Implementing these recommendations would allow IRS to make strategic decisions about enforcement and outreach priorities to help it reduce the estimated $80 billion annual tax gap for sole proprietors," read the report.
Ways to improve taxpayer experience
The IRS recently disbanded its Taxpayer Experience Office, which had been overseeing dozens of initiatives to modernize customer service. IRS officials told GAO they are reassessing those projects as funding tightens and staffing levels fall.
The watchdog recommended that the IRS adopt a fully evidence-based approach to measure whether its customer service improvements are benefiting taxpayers, but it has not done so yet.
One long-standing weakness involves paper-filed returns. Despite promises to digitize filings, millions of returns still arrive on paper, slowing refunds and complicating enforcement actions. GAO said the IRS must accelerate efforts to digitize returns and expand the use of its Return Review Program to detect fraud earlier.
Cybersecurity gaps persist, including risks from third-party preparers
The report also warned that the IRS still does not maintain a complete inventory of the systems that store or process sensitive taxpayer information, leaving vulnerabilities that could be exploited by cybercriminals. GAO identified 22 new control weaknesses in the agency’s financial systems audit.
Third-party tax preparers and software companies also pose risks, and the GAO criticized the IRS for rejecting a recommendation to establish centralized leadership to coordinate oversight of these outside entities.
The GAO encouraged Congress to continue pressing the IRS for progress, noting that lawmakers could hold hearings, require periodic updates and provide more authority to the agency in certain areas.
Despite the challenges, the oversight agency noted some recent successes, including upgrades to the “Where’s My Refund” tool, as well as new efforts to combat identity theft, and improved analysis of information reporting forms.
Still, Dodaro emphasized that sustained leadership attention is needed, writing that fully implementing the open recommendations “may significantly improve government operations” and strengthen the integrity of the tax system.
Nicholas Ballasy
Source: https://justthenews.com/government/federal-agencies/gao-says-irs-hasnt-implemented-most-their-recommendations-improve
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