It’s Time for Structural Reforms at the IRS

President Trump began his second term with bold steps to rein in bloated federal bureaucracy and restore accountability across government. Early in 2025, the newly formed Department of Government Efficiency identified serious, longstanding issues within the IRS. Recent staffing reductions mark a promising first step but turning around an agency with a deep history of mismanagement, harassment, and political targeting will require focused reform.

The IRS has executed overly aggressive enforcement actions directed at taxpayers, families, and businesses for decades. Under the Biden administration, units like the pass-through audit team have even targeted business owners for lawful activity. These aggressive tactics are lawless, bypass Congress, and violate President Trump’s order to end the weaponization of the federal government. No longer can the IRS be a playground for Deep State bureaucrats to punish taxpayers according to whatever personal agenda they bring to work.

Thankfully, President Trump and Acting IRS Commissioner Scott Bessent’s recent actions at the agency show a willingness to pursue additional, much-needed structural reforms in the future.

We believe that under Bessent’s leadership there will be a renewed focus on customer service and technological improvements. He has stated directly that the IRS is 30 years behind schedule and $15 billion over budget on modernization.

Any IRS overhaul must begin with exposing a system that takes advantage of taxpayers and reversing years of overreach that sidestepped Congress and eroded public trust.

Here are just some of the specific reforms we recommend:

• Apply common law protections to revert burden of proof back on to the IRS in all tax court and arbitration proceedings.
• Require the IRS to cover the cost of taxpayers legal and commercial accounting fees when the IRS loses in tax court or arbitration proceedings.
• Eliminate IRS’s audit authority for disputes with individual taxpayers involving $10,000 or less and direct all cases involving small businesses with revenue under $1 million to arbitration.
• Require the IRS to directly communicate to taxpayers their rights and protections under the law at the onset of an enforcement action (similar to Miranda warnings).
• Prohibit the IRS from confiscating funds from any taxpayer retirement accounts unless taxpayer voluntarily approves it or is instructed by tax courts to do so to resolve a case.
• Classify and treat all federal, state, and local disaster relief funds provided to taxpayers as non-taxable income.
• Allow taxpayers to fully resolve all remaining disputes in tax court and seek refunds owed to them when the IRS is proven wrong in tax court or arbitration proceedings (Gorsuch Rule)
• Require five-year safe harbor period preventing new rulemakings from altering tax treatment of previously recognized IRS compliance standards utilized by businesses.

At the heart of our complete list of policy recommendations - and AIA’s mission - is protecting individual American taxpayers. For years, the IRS has targeted Americans of all backgrounds, knowing they have limited resources in a David vs. Goliath matchup. The agency has also failed to support taxpayers trying to resolve increasingly common issues or get answers regarding their tax complications.

In addition, AIA seeks to curb some of the IRS’s most harmful practices targeting businesses, which are vital to the American economy. Both small and large businesses have been under IRS scrutiny for years, often due to problematic rules originating during the Obama and Biden administrations that continue to enable misconduct – particularly Revenue Ruling 2024-14.

Meaningful structural reforms that put taxpayers first and reduce uncertainty for American businesses are long overdue. In the spirit of action, AIA puts forward our recommendations to help drive necessary changes—reforms that can rebuild public trust.

It's clear that the IRS is a broken agency that has lost its way. There is a long road to rebuild its reputation—but under President Trump and Acting Commissioner Scott Bessent, now is the time for Congress and the administration to deliver lasting change.

For the full list of AIA’s policy recommendations, visit: https://irsaccountability.org/aia-reforms

Chuck Flint serves as President & CEO of the Alliance for IRS Accountability (AIA). AIA is a nonpartisan organization dedicated to exposing IRS abuse, protecting taxpayer rights, and ensuring the agency serves the American people with integrity and fairness.