Between multiple waves of layoffs and legislative efforts to pull back more than $20 billion in funding, the gradual declawing of the Internal Revenue Service is well underway.
Representative Tom Cole, R-Oklahoma, introduced a
"Conservatives will love this bill because it sets us up to cut taxes and spending in reconciliation, all while effectively freezing spending this year," President Trump said on Truth Social on March 5 as the bill was being drafted. "Let's get this bill done."
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Funding worries are only the tip of the iceberg at the IRS.
Following the 6,000 to 7,000 people let go from the agency in February, reporting from the
The cuts have drawn
Mark Koziel, president and chief executive of the AICPA, said in a March 7 statement that his organization has been in ongoing talks with IRS officials to clarify any news that comes out of the agency and "assess the immediate and long-term implications."
"The ability of the IRS to maintain service levels for taxpayers and their preparers is critically important to the AICPA," Koziel said. "IRS services in combination with modernization efforts, which include technology advancements, have been the bedrock of AICPA's recommendations for many years."
The deepening presence of Elon Musk's Department of Government Efficiency has introduced new challenges at the IRS, which include the aforementioned layoffs but also extend to DOGE's controversial access to taxpayer data. Accountants and legal executives are divided on whether Musk's entity will be damaging to taxpayers or not.
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Below are some of the latest moves out of the IRS impacting the 2025 tax season and what accounting professionals need to know.
New names on list of eligible countries for foreign income exclusion
Ukraine, Iraq, Haiti and Bangladesh are the four new countries added to the list of regions that have had some requirements for foreign earned income exclusions waived for tax year 2024.
The standard eligibility criteria apply to U.S. citizens or resident aliens living and working abroad whose tax home is in a foreign country, and who meet either a bona fide residence test or a physical presence test. Those who meet the requirements can opt to exclude up to $126,500 from their foreign earned income for the 2024 tax year.
Under
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Tax scams on the rise again: IRS
Be it false emails and texts or third-party firms promising to help create IRS Individual Online Accounts, scammers are out in force in 2025.
Malicious efforts to steal taxpayer data aren't limited just to direct communication between scammers and victims. The proliferation of so-called tax experts on platforms like TikTok have led to a rise in W2s and other filing documents being submitted incorrectly.
"Scammers are relentless, and they use the guise of tax season to try tricking taxpayers into falling into a variety of traps. … These red flags can lead to everything from identity theft to being misled into claiming tax credits for which they're not entitled," IRS communications senior adviser Terry Lemons said in a statement.
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W-2, 1095-A added to IRS online accounts
The IRS has added W-2 and 1095-A information returns to its Individual Online Accounts portal for taxpayers covering 2023 and 2024, marking the first documents to be supported.
Both the Form W-2, "Wage and Tax Statement," and Form 1095-A, "Health Insurance Marketplace Statement" for the last two tax years can be found online in the Records and Status tab for each individual. In the instance of taxpayers filing joint returns, the forms will be found in each individual's respective Individual Online Account. State and local tax information will not be supported in the IRS's online portal.
Funding from the Inflation Reduction Act of 2022 has provided the IRS with the necessary capital for adding offerings like
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Diving into Form 6765 for the R&D Credit
Both the Research Tax Credit and its related form for reporting qualified research expenditures have been around for more than 30 years, but new requirements for the filing have some taxpayers stumped.
Experts like Michelle Abel, a principal at Baker Tilly and leader of the Top 10 Firm's credits and incentives group nationwide, specialize in the research credit. Able told Accounting Today that while the form has asked for the total dollar amount for "your wages, your supplies, your contract research and your cloud computing expenses" in the past, there's now a greater information lift on the part of the taxpayer.
"The understanding was always that you're only putting [qualified research expenses] on your Form 6765 that relate to qualified research activities," Able said. "But the form never had any place to provide detail about what all those activities were."
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Shutdown or not, in this case not, the IRS is still open for business
A possible government shutdown has been staved off for now, but tax professionals weren't phased by the stopgap bill's impact on the operations of the IRS.
IRS acting commissioner Melanie Krause told employees
"There's certainly a lot of uncertainty and a lot of anxiety about whether the Service is going to have the manpower to provide the kind of customer service that they have in recent years," Anne Gibson, a senior legal analyst at Wolters Kluwer, told Accounting Today.
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