IRS Modernization Is Moving Forward. Businesses Still Need Certainty. Published August 7, 2026
Over the past several months, the IRS has faced a network of challenges: budget cuts, workforce reductions, and then, not long after, calls to bring some of those same employees back. Through it all, the agency has been prioritizing modernization and new technology to try and fill in gaps left by fewer people and tighter budgets.
Against this backdrop, many experts were wary about how this tax season might go. But for the most part, this year’s tax season went better than most expected, and the IRS deserves credit for executing under pressure. Returns went out and refunds processed largely as usual, even as the agency worked to do more with less.
But a successful filing season isn’t the same as a system free of strain, and filing season is only the most visible part of what the IRS does. Beyond that routine, seasonal processing, the businesses that depend on IRS data, transcripts, and authorizations need something more specific year-round: reliability, transparency, and clear paths to resolve the exceptions that fall outside typical processes. When those things are missing, even a narrow data or operational issue can carry major downstream consequences for the businesses making decisions based upon that information.
Modernization is not without its challenges
The numbers clearly show the kind of stress the agency is under right now. A recent federal watchdog audit estimates that roughly 1 million taxpayers calling the IRS for help did not receive quality service. After reviewing 200 recorded calls to the IRS’s Compliance Services and Accounts Management lines, investigators found 52 of them fell short of the IRS’s own service standards: dropped and disconnected calls, transfer issues, extended hold times, and instances of inaccurate information reaching the taxpayer.
Call service difficulties are not new for the IRS. In 2022, it answered just 1 in 5 calls and struggled during the pandemic. But the agency had been climbing back, passing its goal of 85% levels of service and reaching 88% in 2024, before workforce and funding cuts pulled it further from that progress.
In addition to service delays, the IRS has also faced challenges with transcript reporting. In early June, a glitch in the IRS Transcript Delivery System caused certain transaction codes to drop off Account Transcripts and Record of Account Transcripts, meaning some tax increases and tax reductions simply weren’t showing up. The IRS says its IT team caught and fixed the issue on June 2, and the public notice went out on June 8. By the agency’s own account, the records are now accurate again.
Mistakes happen, and the IRS deserves credit for quickly resolving the issue. But it’s also a reminder of what’s at stake: lenders rely on these transcripts to inform credit decisions, and borrowers often need capital on a timeline. A short-lived data gap can still mean a missed underwriting window or a delayed close, the kind of downstream consequence that filing season metrics don’t capture.
Technology value is tied to trust
The IRS, like a lot of large organizations under resource pressure, is leaning more on technology to fill gaps left by staffing cuts. Automation and digital tools can absorb routine volume and free up staff for the cases that truly need a person.
But technology only earns trust when the people relying on it understand what it does and how it drives value. As with any new technology rollout, tools meant to ease pressure on overworked staff need a fast, clear path to a human when a case falls outside their scope or requires a more complex answer. Automation can and should be part of how the IRS modernizes, but the agency must pair new technology with support for the human employees also on the front lines of customer needs.
So, what does this mean?
These pressures point to the same underlying reality: the IRS is being asked to do more with fewer resources, and that dynamic outlasts tax season.
Modernization is necessary, and it’s already underway. Now, the agency must pair new digital tools with transparency, reliability, and clear paths to resolve the exceptions that fall outside the typical processes.
The IRS deserves credit for getting through a difficult filing season, and it deserves a high bar for what comes next. But a stressful environment doesn’t call for panic. Having accurate tax information comes down to preparation, understanding the human and technical mechanics behind the processes, and working with partners who are experts in the space.
At Tax Guard, we pride ourselves on being a trusted advisor to our customers, advocating for their needs as the tax administration environment continues to evolve. We make sure our customers have the accurate, critical information they need to make well-informed business decisions. As the IRS continues to modernize and policies continue to evolve, we’re helping our customers navigate what comes next.
If you have any questions, please don’t hesitate to contact our customer success team.
