By Jacob Bogage, Meryl Kornfield, Patrick Svitek · The Washington Post (c) 2025
Given all the news out of the IRS lately, I started pondering what Tax Day 2026 will look like. I asked my sources inside the IRS, in the tax community and in the Trump administration to play it out with me. Most of these people spoke on the condition of anonymity so they could offer candid assessments.
The responses, as you can imagine, were varied. But generally, people told me, it will be a very different IRS in 2026 – or even October 2025, for you all who took extensions – than it is today.
Folks at the IRS and in the tax community are nervous about the future of voluntary compliance. That is, people willingly and truthfully filling out their returns and paying balances owed. As the Treasury Department and the U.S. DOGE Service steadily slash the IRS’s workforce, numerous current and former tax officials told me they were worried that could induce people to cheat on their taxes who otherwise wouldn’t.
“If you’re a business and you think your competitors are taking an increasing amount of tax risk, it puts pressure on you to also take more risk,” one person said. “Everyone will be pushing the boundaries a little more aggressively.”
A senior Treasury official told me the department was in the midst of a compliance strategy that would lean on new engineering projects with a goal to double collections.
The Trumped-up IRS will certainly need to rely on technology with planned massive cuts elsewhere in the budget. The White House’s budget contemplates cutting $2 billion from the IRS compliance budget this coming fiscal year, according to two people familiar with the proposal. Cuts to other areas of the agency are also in the offing, and that’s on top of cuts DOGE has already made, including $2 billion gone from the IT budget, the Treasury official said.
Altogether, the tax agency will have trouble making payroll if Congress approves those budget levels, I’m told, and the IRS’s headcount will be forced down to 50,000 employees – roughly half of what it was in January.
One thing that could get the IRS closer to that employmentfigure: The agency offered a second “fork in the road,” or deferred resignation program. The number of applicants has staggered agency officials, and even the acting commissioner is taking the DRP. More than 19,000 agency employees have applied for the offer that will allow them to stop working but keep getting paid and receiving benefits through Sept. 30, people familiar with the matter told my colleague Shannon Najmabadi and me.
“Staffing reductions that are currently being considered at the IRS will be part of – and driven by – process improvements and technological innovations that will allow the IRS to collect revenue and serve taxpayers more effectively,” the Treasury Department official told me.
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Outsourcing and automating
So let’s talk about how the IRS will collect revenue.
Right now, the agency works on an “assembly line” method. The more people the IRS can throw at processing tax returns – digitally, but mainly on paper – the faster and more accurately it can turn in results. Under the Biden administration, the IRS purchased scanning technology to digitalize paper returns, but the rollout of that hardware and software was “bumpy,” one person told me.
“We were absolutely on the path to doing that. Yes, there were bumps in the road. And yes, it was going to be expensive,” said another.
DOGE engineer Sam Corcos has another idea for that, people told me. The IRS would consolidate its campuses that receive paper returns or correspondence and allow each to specialize: One would gather the paperwork; another would scan it into agency data systems. That work, Corcos suggested, could be outsourced to companies that could do it for less than what it costs the IRS to maintain those facilities and employ legions of staffers.
Corcos gave agency IT pros 90 days to digitize the IRS’s filings but pulled back on the request when senior employees told him that timeline was unrealistic.
The Treasury official told me eliminating paper was a key goal for the Trump administration. The IRS spent $450 million on paper processing in 2024, according to Treasury and aims to get that cost down to $20 million by 2026.
So next tax season, under Corcos’s proposal, you may be filing your return not to a government employee, but to a contractor who will feed it through scanning hardware and software and run the extracted data through AI.
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It’s all about the API
That scanning is key to the heaviest technological lift Trump’s IRS is attempting, building what’s called a “unified API layer.” You really don’t need to know what that is or does – only that it will help the IRS put all its data in one place.
That’s important because of what Corcos, fellow DOGE member Gavin Kliger and other Trump administration officials have suggested: sharing that tax data across the government to search for benefits fraud. The Washington Post was first to report on this idea, in March. The upshot is that the IRS would share tax data with other agencies to proactively investigate taxpayers’ use of student loan and grant programs, the Supplemental Nutrition Assistance Program known as food stamps and other federal benefits.
To do that, the IRS would need the “unified API layer” that could connect to those other agencies. Makena Kellyfrom Wired magazine has done great work on this topic, and I can confirm her recent reporting that Palantir, the tech firm co-founded by Trump booster Peter Thiel, has been involved with the early stages of building this product.
Palantir, though, has had a long-standing relationship with the IRS, and agency executives I talked to are very fond of its work. “Palantir is like the Rolls-Royce of this stuff,” one said.
The company was in the midst of bidding on contract for a Biden-era project called “Taxpayer 360.” It would have used a “unified API layer” type of product to vastly simplify the screen an IRS call center representative would use to help a taxpayer on the phone. Instead of toggling between a number of screens and programs, the contract asked the vendor to build a data system that could streamline all the relevant information into a “single pane of glass” view.
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What this means for you
Finally, for 2026, there’s how you actually file your taxes.
The Trump administration appears poised to kill Direct File, the free government-backed competitor to Intuit TurboTax, H&R Block, TaxSlayer and more. The senior Treasury official called it a “failed program” and a “disappointing program,” citing its limited reach.
More than 200,000 taxpayers are expected to use it this year, officials say, up from roughly 150,000 a year ago. That’s a lot of people, but a very small percentage of the total taxpaying public.
But it’s not a fair representation of the success of the program, Merici Vinton, one of Direct File’s main architects and a former IRS senior adviser, told me. The IRS did not promote Direct File during this filing season, she said, and the product isn’t yet ready for more complex tax situations.
When Elon Musk, who oversees DOGE, tweeted that he eliminated the team at IRS that runs the program – by the way, he didn’t actually get rid of that team – the IRS was flooded with calls asking whether Direct File was still available.
“What’s killing Direct File is complete indecision internally,” Vinton said.
Kliger arrived at the IRS bullish on the idea of a user-friendly tax system, Vinton and half a dozen other current and former IRS officials told me, then backed away from the idea.
Despite recounting the many ways the Trump administration was “disappointed” in the “failed” Direct File program, the senior Treasury official also said, “No decisions on the future of Direct File have been made yet.”