IRS Watchdog Sounds the Alarm on 2026 Tax Season

Happy Monday. Tax season is in full swing, and the IRS is already sweating. Here's what happened this weekend that actually matters for your practice.

THE RUNDOWN

1. The IRS Watchdog Just Said What We Were All Thinking

The National Taxpayer Advocate dropped her biannual report to Congress, and it’s not pretty.

Erin Collins — the IRS’s internal watchdog — warned that 2026 could bring “greater challenges” for taxpayers compared to last year’s relatively smooth filing season. The culprits: massive workforce reductions, leadership turnover, and what she calls “extensive and complex” tax law changes.

The IRS has lost tens of thousands of workers since 2025. Collins’ message to Congress is essentially: the system works fine for people who file cleanly and digitally. But for the millions who hit a snag? They’re on their own.

What this means for you: If a client has a complicated return — amended filings, payment plan requests, identity theft flags — brace for delays. The IRS doesn’t have the bench depth it used to.

2. IRS Launches Centralized Fraud Reporting (And It’s Actually Useful)

The IRS quietly launched a new fraud reporting hub at IRS.gov/SubmitATip — consolidating what used to be scattered across multiple forms and phone lines into one place.

Taxpayers can now confidentially report suspected tax fraud, evasion, scams, or other illegal activity in one click. IRS CEO Frank Bisignano said the goal is to streamline the referral system with fewer forms, automated processing, and modern case management software.

There’s also a bonus item buried in the announcement: starting for tax years after 2024, up to $5,000 of the adoption tax credit is now refundable under the One Big Beautiful Bill. If you have clients who adopted recently, this one’s worth a second look.

What this means for you: Flag IRS.gov/SubmitATip for clients who suspect their information has been misused. And run through your client list for anyone who adopted a child — there may be refundable credit money sitting on the table.

3. AI Is Eating Entry-Level Accounting. What Happens to Training?

Journal of Accountancy’s March issue asks the question that every firm partner is quietly nervous about: How will accountants learn new skills when AI does the work?

The premise is simple. Entry-level tasks — reconciliations, data pulls, basic prep work — are being automated. Those tasks used to be how young accountants built judgment. Now that training ground is disappearing.

JofA argues the focus will shift to simulation, judgment-based learning, and continuous upskilling. But let’s be honest — most firms haven’t figured this out yet.

What this means for you: If you’re managing staff, this is the talent development problem of the decade. The firms that build structured mentorship and judgment-based training now will have a serious edge in 3-5 years.

QUICK HITS

CPA firm M&A is still hot — and the tax issues are getting messier. PE-backed deals are forcing firms to rethink entity structure.

Tax refunds up 11% this season — average refund is tracking higher than last year. Clients are going to notice.

Adoption credit clarification — IRS released FAQ FS-2026-03 explaining refundability and tribal “special needs” determinations. If relevant to your practice, pull it.

That’s it for today. If something here was useful, forward it to a colleague — we’re building the newsletter CPAs actually want to read.