During 2025 the IRS dropped from 103,000 employees down to around 76,000 personnel or roughly a 25% cut. Interestingly, we have seen an uptick in hiring in 2026 (with the Treasury Department authorizing 8,000 new hires) but not nearly enough to make up for the damage this is still inflicting on Accounts Payable and Tax Departments around the country. That's because IRS Tax support has been gutted, regulations aren’t being written on a timely basis - and that is making it really hard on you and your peers struggling to respond to the slew of new information reporting laws.

To that last point, regulations can be good (helpful) or not (bad). When it comes to the Treasury Department they tend to be helpful for Accounts Payable and Tax departments because they can flesh out how IRS auditors approach the law and help you better define your 1099 compliance and reporting requirements. Without timely regulations it thus makes it harder on you to figure out how to traverse the subjective grey zone of compliance and reporting. That means you need even more documentation to back your reporting decisions, lest you get caught in an interpretation of the law at odds with what a regulator would decide. This imposition of additional business costs to your organization is the real downside of IRS cuts.

Everyone likes to point to enforcement declines as a positive, and on a personal level they are real. However, the IRS still has a strategic mandate that very much involves you in your job at accounts payable, tax, or maybe as an independent CPA. It’s budgets have been and remain targeted on closing the tax gap. That's the difference between what the federal government is owed from taxpayers such as your organization versus what it takes in. Two of the largest components of the tax gap are tax dodging by the billionaire class, and the unintended 1099 underreporting of income amongst businesses and corporations (like the ones you might work for or represent).

Given how society is currently structured that leaves your organizations and the 1099 world as the low-hanging fruit for remedying the tax gap. You make a mistake and it can lead to your company or organization facing backup withholding notices, penalty notices, or audits – and all of that is very expensive. Worst case scenario it can even cost you your job. Because you are doing something that has real consequences you want to be careful.

Even when you don't think you made a mistake, we are seeing evidence from our business clients as to how much extra work the recent decline in IRS efficiency has caused them. For example, one of the big issues of late has been IRS notices informing businesses that they under reported their quarterly with holdings when they did not. These are much harder issues to resolve now because it is so difficult to find anyone at the IRS to answer the phone, no less work through where they made a mistake. We have never seen it this bad. Hours of waiting and still no one to speak with, letters sent in and responses coming only months later - if at all.  According to a recent report by the Taxpayer Advocate, the number of unprocessed correspondence and amended returns languishing at the IRS jumped from 3.8 million in 2025 to 7 million this year.

In addition, The Taxpayer Advocate Service's June report to Congress stated that live humans answered 20 percent fewer calls during this year’s tax filing season. Worse yet, hold times jumped anywhere from 81 to 161 percent, depending on the line called. Only 17 percent of the calls handled by the “voicebot” system were completed (with completed not even acknowledging that often times the IRS representative involved lacked the experience and training to deal with the issues at hand). The IRS online system has also been significantly degraded, costing businesses even more time and money. All of this is why you need to be aggressively proactive in terms of collecting vendor information, properly validating it, and being thorough in your Year-End prep for 1099 filing season. Remember, even if you are turning over your information to a third party to file on your behalf - your organization is still responsible for the data and faces liability for any filing mistakes or omissions. 

You need to rely on guidance from trusted professionals or if you are going the self-help route, then don’t do anything that doesn’t rely on IRS guidance as the source for your decision-making (treasury regulations, publications, revenue procedures, code sections) and the application of those rules to your unique facts and circumstances. That has to be stated because A.I. is a tool of uneven utility as of yet. It can be helpful, but it can also hurt – and just like your adaptation of past tools – you need to know when to use it and when not to. For instance, A.I. can seem useful to generate directionally correct content. However, unless you are an expert in your field it can be really hard to tell if the guidance it’s providing is accurate or not. That’s tough to trust when a bad call can produce an expensive and potentially job impacting IRS or state level audit or penalty.

Just remember, and if you are concerned about your job as part of all of this note that AI will not replace Accounts Payable and Tax Professionals. But, it is changing what you do. And you should embrace that. Just like you embraced Microsoft office tools when they came out – like Word, PowerPoint, and Excel. If you think of AI as another tool in that tool kit then you are on the right path in regards to how to think about it. For instance, routine tasks like data entry can be increasingly automated. Conversely, that means you now have a higher level task opened up for you to do - like overseeing that automated A.I. directed process and making sure its done right. To that point, always remember to think of A.I. as not just like a tool to use but also like hiring an intern. You don’t just take their work product at face value: you have to double check it – and that requires higher levels of knowledge and expertise.

All of this also requires you to engage with A.I. and not bury your head in the sand. Many of you may remember listing competencies in programs like excel on your resume’s years ago, in turn indicating you are comfortable using the latest AI LLM’s available will be something you should be putting on your resume now. And that is not a bad thing. In effect, your job is leveling up and this frees you to focus on the kind of far from black and white subjective fact and circumstance based tasks that surround tasks like effective W-9 form validation and 1099 reporting. It means your value to your organization increases in importance. And you need to remind your co-workers of that. Remind management of that.

Remember, if management can fire many of you and pocket the difference then they will. And many of them are seeing A.I. as that vehicle, but they are mistaken. Right now and for the forseeable future it cannot think for itself, it is simply regurgitating everything it has absorbed from the internet and making it up when it can’t. This is a detail oriented job that doesn’t allow for those kind of mistakes and you need to remind management of your value in focusing on higher-end analytical tasks like what we are discussing today that software, computers, or A.I. simply can't handle.

For that matter, you might be thinking, ok how should I use A.I. to best help my ongoing professional development, job security, and to do my job efficiently. Well, we have built those answers into our upcoming 1099 year-end programs and filing guide. That guide and those programs will help show you how it is you will use AI as a tool. To that point…and because everything I talk about in my programs is based on real world experience and the actual law (code sections, regulations, and related academic studies)… Just recently a new study from researchers at Carnegie Mellon, Oxford, MIT, and UCLA found that how you use AI determines whether it adds to your intelligence and job competence — or takes from it. 

When people used AI to get direct answers, just 10-15 minutes of AI assistance was enough to hurt performance and increase the likelihood of giving up once the AI was removed, even on problems they should have been able to solve. But that damage was concentrated among people who asked the AI for direct answers. 

The 61% of AI users who requested straight solutions showed the sharpest decline. People who used AI for hints or clarification? Their results were similar to those of the no-AI group. The researchers believe that when AI handles the hard work, you never build the mental model needed to solve it yourself. And when instant answers become routine, unassisted thinking starts to feel disproportionately hard, a kind of recalibration that turns normal effort into something that feels like a defect. Let us help you not only learn how to use AI as a tool to help deal with the lack of IRS support but also level up your W-9/1099 knowledge, skills, and value with your organization!