Impact of Federal Cuts on the IRS

By Krysta Smith, Manager

Recently, there have been significant federal funding cuts across various federal agencies, and the Internal Revenue Service was not exempted from these changes. In 2022, Congress passed the Inflation Reduction Act which allocated an additional $80 billion to the IRS to improve the services they provide, increase compliance and enforcement action, and modernize the systems they use. Through this past March via various bills, Congress has reduced funding to $38 billion, the impacts of which will likely be felt by most taxpayers and the businesses they own. Below is a list of suggestions to make interacting with the IRS less painful.

E-file tax filings, where possible

  • During 2020, we saw the extreme slowdown of the processing time for documents physically mailed to the IRS, so much so that for a period of time they stopped processing certain forms all together. It will become increasingly important to electronically file your tax returns, when possible. The IRS is slowly increasing the number of forms they accept electronically, as well as where they will accept electronic or copies of signatures, vs. “wet” signatures. Take advantage of technology where you can.

Recordkeeping is vital

  • If you’re physically mailing anything to IRS, or any other taxing authority, you should always use certified mail. Keep copies of your receipt and the acknowledgement that the item was received. This will prove that documents were mailed on time and can also give you peace of mind.
  • Make copies of everything you send to the IRS, including tax returns, checks, and any correspondence. Keep them for your own records, and consider sending them to your CPA as well, if they don’t already have a copy.
  • If you make payments to a taxing authority online, make sure you print off a copy of the payment confirmation.
  • Use our Records Retention Guidelines to decide how long you should keep certain documents.

Consider a Power of Attorney for your CPA

  • You can sign a Form 2848 Power of Attorney that lists authorized individuals who can gather information on your behalf, as well as discuss your tax account with the IRS. These can be filled out to address certain types of taxes and for any tax year you decide.
  • Some states have their own Power of Attorney form, which means they will not accept a federal Form 2848 as authorization. As of 2025, Oregon has two separate forms; one that authorizes a representative to gather your tax account information, and the other to represent you in front of the Department of Revenue.

Consider signing up for an ID.me account

  • An ID.me account is an online login that can be used across multiple federal agencies. There is an initial ID verification process but set up is easy and fairly quick.
  • Having this account will allow you to check your own tax account with the IRS, where you can see previous and current year tax information and payments that have been made.
  • You can also approve a Form 2848 Power of Attorney request your CPA sends you via the same IRS ID.me system, making it easier for you and your CPA to communicate with the IRS.

If you have additional questions, contact your tax professional at Kernutt Stokes.

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