IRS gets more complication with less staff
'Big Beautiful Bill' added layers of complexity to system already bordering on unintelligible
ANOTHER VIEW | BLOOMBERG NEWS
Taxpayers aren't usually inclined to sympathize with the Internal Revenue Service, but this year they probably should. Thanks to a brutal combination of staff shortages and new complications in the tax code, the filing season now underway has put extraordinary strain on the agency.
The Biden administration aimed to modernize the IRS and increase its staffing, correctly calculating that better tax enforcement would pay for itself many times over.
Soon after the plan was announced, Congress began rolling back the necessary funding — a shift that accelerated. In 2025, changes driven by the so-called Department of Government Efficiency cut IRS staffing by more than 25%. By January, the agency had been led by seven diff erent commissioners in the space of 12 months.
Then last year's One Big Beautiful Bill Act added layers of complexity to a system already bordering on the unintelligible. The new law extended earlier tax cuts about to expire and added new ones .
Together with weaker enforcement, the changes will deny the government revenue it urgently requires to get borrowing under control. Many lower-income taxpayers will struggle to understand and comply with the rules. No doubt, they'll be pleased to get bigger refunds for 2025 — but there'll also be more delays, mistakes and frustration than usual.
Much of the confusion arises from maneuvers to pad this year's refunds, conveniently timed to influence November's elections.
New deductions for mortgage interest, seniors, tipped income, overtime pay and interest on car loans serve no clear economic purpose but do undermine what was best about the 2017 Tax Cuts and Jobs Act — namely, simplifying the system by encouraging more taxpayers to claim a bigger standard deduction instead of itemizing.
The expanded mortgage deduction will lead many taxpayers to switch back to itemizing. Most of the other new deductions come with their own complications.
For instance, to see whether your car loan payment (of up to $10,000) fully qualifies, just check that your modified adjusted gross income is no more than $100,000 for single filers ($200,000 for joint filers), above which your deduction phases out by $200 per $1,000 of excess income; that the car is new, not leased, for personal use, and weighs less than 14,000 pounds; and that the loan was initiated after Dec. 31, 2024.
Then feed your vehicle identification number into the National Highway Traffic Safety Administration's VIN decoder to confirm plant of manufacture and final assembly in the U.S.; report loan interest paid as per your Form 1098 . Now complete the eight steps of Part IV of Schedule 1-A of your tax return and you're good to go.
Sound tax policy requires simple rules administered by an adequately resourced agency. The U.S. has a code that's a parody of complexity and an IRS that's acutely understaff ed. Bad as things are, there's always a way to make them worse.
