Podcast Summary: "The 2026 Tax Filing Season is Upon Us. Is the IRS Prepared?"

The Daily Scoop Podcast | February 10, 2026
Host: Billy Mitchell
Guest: Matt Bracken, Editor in Chief, FedScoop

Overview

This episode delves deep into the preparedness of the Internal Revenue Service (IRS) for the 2026 tax filing season in light of significant workforce cuts, modernization challenges, and increased reliance on AI. Host Billy Mitchell and FedScoop's Matt Bracken analyze the implications of drastic staff reductions, assess the progress (and obstacles) in IRS technology modernization, and discuss the evolving role of artificial intelligence in federal agencies. The episode also touches on recent legal developments surrounding IRS data sharing with Immigration and Customs Enforcement (ICE). The conversation provides insight into systemic challenges and the uncertainties that taxpayers (and the agency itself) will face this filing season.

Key Discussion Points and Insights

1. IRS Workforce Cuts and Impact on Filing Season ([05:26]–[07:43])

• Seismic Staff Reductions: The IRS has undergone substantial cuts since the Trump administration resumed in 2025, including a rollback to pre-Inflation Reduction Act staffing levels.
  • 19% of IRS staff—approximately 19,000 jobs—were eliminated.
  • Among those, 8,300 workers responsible for key filing season functions (customer service, IT, returns processing) lost their jobs.
• Modernization Setbacks: Continued reliance on legacy systems and slow modernization has been a chronic problem for the agency.
• Taxpayer Impact: There is a dramatically increased risk of delayed processing and backlogs; IRS inventory of unprocessed returns is already 129% higher than pandemic-era levels.
• Notable Quote:

  "They’re operating with a staff that's just basically October 2021 levels, how big the agency was before the Inflation Reduction Act."
  — Matt Bracken [06:23]

2. IRS Response: Reassignments and Band-Aid Approaches ([07:43]–[08:50])

• IRS is redeploying staffers from non-tax-processing roles to handle returns in an “all hands on deck” moment.
• Advice for Taxpayers: File as early as possible due to the expected strain.
• Notable Quote:

  "They’re now pulling people whose responsibilities [don’t include] tax return processing to now do that because the staff is so abysmally reduced..."
  — Billy Mitchell [07:48]

3. AI and Automation—Promise vs. Reality ([08:50]–[12:21])

• Leadership Shifts: With Scott Bessant as Treasury Secretary and Frank Bisignano as the newly minted IRS “CEO,” there is a top-down belief in AI to compensate for workforce gaps.
• AI Adoption Stats: AI use cases at Treasury/IRS have increased from 49 to 61 in the last year.
• High Hopes, Uncertain Results: Leadership touts AI as a panacea, especially to offset a 16% IT workforce loss and push “smarter IT.”
  • However, AI initiatives like “zero paper AI routing for digitization” remain in the pre-deployment stage.
  • The effort to end paper returns by 2026 is falling behind.
  • No AI use cases formally listed for enforcement, audit, or collection functions.
• Concerns:
  • Is AI mature enough for the task?
  • Will loss of "humans in the loop" inhibit AI’s effectiveness?
  • Large numbers of senior technical staff have exited.
• Notable Quotes:

  "They would probably also argue that, again, the AI is going to make up for some of these shifts, some of these losses of long-standing IT expertise... probably a bit of a leap of faith at this moment."
  — Matt Bracken [13:35]
  "Especially when a lot of those humans in the loop, which are very important to successful implementation of AI, are now gone."
  — Matt Bracken [12:14]

4. Modernization Investment Rollbacks ([12:26]–[14:56])

• Exec Cuts and Restructuring: The agency lost 50 senior IT executives; up to 1,000 IT professionals were reassigned to roles outside their expertise.
• Impact: Internal uncertainty and doubts about the agency’s capacity to achieve longstanding modernization goals.
• Funding Risks: No new major infusions like the Inflation Reduction Act in sight to shore up IT or service gaps.

5. IRS–ICE Data Sharing Controversy ([14:56]–[18:52])

• Background: ICE and IRS had a Memorandum of Understanding (April 2025) to share taxpayer data for enforcement.
• Legal Pushback: Multiple recent federal court rulings have blocked ICE’s bulk access to IRS data over privacy concerns and potential harm to non-citizens.
  • Section 6103 of the federal tax code strictly protects taxpayer privacy.
  • Judges highlighted the risks: large-scale mismatches, duplicates (e.g., common surnames like “Kim”), and chilling effects on non-citizens seeking compliance help.
• Recent Case: In one incident, ICE requested data on 1.3 million taxpayers, yielding 450,000 matches.
• Business Harm: Immigrant-serving organizations faced irreparable harm as clients withdrew for fear of enforcement, impacting federal tax revenue.
• Notable Quote:

  "The judge in this most recent case noted... when you're dealing with these bulk data sets, there's obviously a huge potential for mismatches and misidentifications."
  — Matt Bracken [16:54]

6. Looking Forward—What to Watch ([18:54]–[19:52])

• Filing Season Watch: The coming months will test the predictions regarding IRS processing slowdowns and modernization.
• AI Across Government: AI adoption trends are under scrutiny not only at IRS but across agencies like DHS and DOJ.
• Notable Quote:

  "These issues are not just at IRS. They are felt across the federal government right now."
  — Billy Mitchell [19:52]

Memorable Quotes

• On staffing challenges:

  “They’ve lost 19% of their staff. It’s like 19,000 jobs... including 8,300 workers who were tasked with key filing season functions, gone from the agency year over year.”
  — Matt Bracken [06:46]

• On AI’s limitations and optimism:

  “The agency is embracing more AI, but I think again, it remains a wait and see on how effective it is.”
  — Matt Bracken [11:39]

• On modernization skepticism:

  “Probably a bit of a leap of faith at this moment. And something else to keep in mind: There’s no Inflation Reduction Act Part Two that’s gonna infuse funding to address some of these shortcomings.”
  — Matt Bracken [14:50]

• On privacy and ICE data-sharing:

  “When you’re giving taxpayer data, which have these privacy protections, to a different agency, that’s a massive change in decades of policy.”
  — Matt Bracken [17:53]

Timestamps for Key Segments

• Intro and Headlines: [00:01]–[04:12]
• IRS staff cuts and challenges: [05:26]–[07:43]
• All-hands-on-deck, reassignments: [07:43]–[08:50]
• Rise of AI at IRS, what’s real?: [08:50]–[12:21]
• Modernization setbacks: [12:26]–[14:56]
• ICE–IRS data sharing legal saga: [14:56]–[18:52]
• What’s next/closing thoughts: [18:54]–[20:03]

Tone and Takeaways

The conversation is pragmatic yet candid: both host and guest recognize leadership optimism about AI and modernization, but are quick to highlight the concrete risks and gaps created by workforce and funding cuts. The episode is essential listening for anyone tracking federal agency performance, technology modernization, or the intersection of policy, technology, and workforce in government operations.