G. Gordon Liddy, convicted of several criminal charges for his role in the Watergate scandal, made the statement that “obviously crime pays, or there’d be no crime.” John Maynard Keynes, economist and philosopher, further indicated that “the avoidance of taxes is the only intellectual pursuit that still carries any reward.” As we enter the fourth week of a government shutdown on the heels of large cuts to the Internal Revenue Service and an end of the Department of Justice Tax Division it’s fair to ask – what does tax enforcement look like in the future? Even the United States Tax Court has announced cancelling trial sessions because of funding issues.

The Internal Revenue Code is no less complex. Arguably, with the addition of the One Big Beautiful Bill Act (OBBBA), the tax law is even more complicated. Every time money moves, there are tax consequences and taxpayers must analyze every financial transaction. Effective tax enforcement requires both affirmative guidance on proper tax treatment and a belief that abuse of the system will be properly found and punished. Taxpayers and the government don’t always agree – and those disputes must be resolved. What does that resolution look like as we end 2025 and move into 2026.

Can A Depleted IRS Effectively Manage Tax Compliance?

A recent report by the Treasury Inspector General for Tax Administration (TIGTA) outlined major management challenges facing the IRS in fiscal year 2026. The report notes that the IRS has lost 25% of its employees since January 2025 and more layoffs are being handed out during the current government shutdown. While the government is shutdown it is somewhat expected that IRS operations will be slow, limited, and delayed. In my own practice it is difficult to get anyone at the IRS on the phone or to return voicemails, emails, or letters sent requesting a response. While taxpayers and their advisors may hope that the end of a shutdown will improve service, that may not occur. The IRS has tax law changes to implement, sensitive data to protect, an antiquated computer system it hopes to upgrade, and a shrinking workforce to accomplish all of these goals. The TIGTA report specifically mentions 150,000 individuals with gambling winnings of $13.2 billion over a three-year-period who failed to report the income but the IRS had not started any enforcement action.

Perhaps enforcement only means delays, but with a limited staff some sacrifices will necessary and 2026 will be the year the IRS figures how much it can still do with less people and funding. Taxpayers and their advisors will watch for patterns and review guidance to try and decipher where focus is moving and advise their clients accordingly.

Can A DOJ Without A Tax Division Enforce Tax Laws?

As part of the most recent federal budget the Tax Division of the Department of Justice (DOJ) was eliminated and the tax attorneys remaining will be folded into the broader Civil and Criminal Divisions of the DOJ. The full transition may be delayed by the current government shutdown, but eventually it will be completed. A recent organizational chart for the Department of Justice Criminal Division puts the new “Tax Section” along with the Office of Enforcement Operations and the Public Integrity Section. Ultimately, this may change may only involve new top management (i.e. Assistant Attorney General and Deputy Assistant Attorney General) but even that change will have an impact. It could also change the ability of the DOJ to attract tax focused attorneys to the general ranks of civil and criminal litigation.

Without a separate budget, staff, and tax specific priorities a more targeted approach to tax administration will almost certainly be more difficult. For example, a June 11, 2025 memorandum to all Civil Division employees outlined policy objectives which, while arguably worthwhile, do not specifically indicate how tax enforcement will be included or prioritized. One potential positive, however, is that a lot of civil and criminal priorities for non-tax litigation may benefit from the skills and expertise of former Tax Division attorneys trained to follow the money.

During my own tenure at the Department of Justice Tax Division I would spend hours at a whiteboard mapping the flow of funds and pouring over financial documents looking for insight. Tedious? Yes. Revealing of other antics and angles for litigation? Also, yes. Whether the lawyers who enjoy a legal practice bordering on accounting, finance, and other number-based analysis choose a general “civil” and “criminal” Department of Justice remains to be seen. The immediate future, however, will include the current tax lawyers digging in and investigating and going after financial shenanigans in both tax and potentially other litigation.

Civil and Criminal tax enforcement will certainly not end since it is required for the public to trust and comply with a self-reporting tax system. However, it will certainly change as resources, personnel, and management change the attorneys charged with the task of enforcement must change as well. As 2025 ends and 2026 begins the “new” tax enforcement structure should appear and taxpayers and their advisors will know more.

What Can A Taxpayer Do Without Administrative Options?

Although it is fair to sometimes believe that all the IRS does is brow-beat taxpayers, it also does provide a “Service”. We do not have a replacement for our self-reporting tax system and so taxpayers must still report their income and other transactions in compliance with the Internal Revenue Code. Even with both parties doing their best, a system with every individual and entity in the United States reporting cannot happen without disputes, errors, and other items requiring taxpayers to use the IRS to resolve those issues. When a problem occurs, you want your interaction with the IRS to be as quick and painless as possible. That’s harder to do with limited resources.

When less resources exist more taxpayers will need to seek relief from the Courts. Many taxpayers are able get through an audit with no changes or resolve the issues with the IRS revenue agent. Many taxpayers with unpaid tax liabilities are able to negotiate a mutually acceptable payment plan or other collection alternative. However, with less revenue agents and revenue officers handling more cases the number of resolutions is bound to decrease. This is especially true given that the IRS, generally, has only three years from the filing of the return to make any changes or they are time barred. Collections has limitations as well. These limits can be extended in some cases, but not all. Even if an extension is available it might not advisable. Any dispute, if lost, will incur interest from the time payment was due until it is paid. Any unpaid amount also carries interest. Therefore, a taxpayer’s voluntary extension of time to assess could end up costing them a lot in interest.

If you cannot resolve your case within the IRS and before the applicable time limitations, you’re only remaining option is to sue the United States. If you can file a case in Tax Court, it is a pre-payment forum and you can avoid payment until the end of the proceedings. However, interest continues to add up during those proceedings unless paid or you are successful in eliminating all adjustments.

For amounts already paid, or if a taxpayer pays and files a refund claim, a taxpayer can file a suit to recover those amounts in United States’ Federal District Court. Although any litigation, including litigation against the United States, is expensive it may be the best and potentially quickest option for resolving disputes. The amount at issue must justify the litigation, but at some point a taxpayer’s only choice is pay or fight. IRS Counsel (primarily handling Tax Court) and the Department of Justice (primarily handing Federal District Courts) have both suffered reductions in staff as well. However, the government as a party in a lawsuit must still answer to the court and the deadlines applicable to all litigation. For example, the IRS has no time limit on processing a taxpayer’s claim for refund and can just let it linger forever. The statute allows the taxpayer to file suit if there is no response after six months of waiting, but without suit a taxpayer could wait forever. Relying on the government to act on a claim may not be a great option for taxpayers going forward.

Conclusion

Although some may believe that a smaller IRS less focused on enforcement is a positive, that fails to account for those who affirmatively need the help of the IRS to resolve disputes. If you need to amend a tax return to claim a refund, you want a fully functioning IRS to process that refund and return your overpayment. For now, it is unknown how the reduced staff and funding will impact IRS level services, but usually less funding is less service.

This article was originally published on Forbes.com on October 29, 2025.