IRS Enforcement Priorities for 2025–2026
The IRS has laid out an ambitious enforcement agenda for the 2025–2026 cycle. With increased funding from the Inflation Reduction Act, updated technology, and a renewed mandate to close the “tax gap,” the agency is intensifying efforts across several high-impact areas.
Review these priorities while bearing in mind the impact of the 2025 mass reduction in the IRS workforce. Together, these changes mean IRS enforcement will rely more heavily on technology and automation.
High-Income and High-Wealth Taxpayer Compliance
Enforcement against high-income earners and non-filers remains a top priority. The IRS has already launched initiatives targeting more than 125,000 high-income individuals who failed to file returns, including over 25,000 with incomes exceeding $1 million. This raises the likelihood of IRS audits, substitute returns, penalties, and levies, with expanded third-party reporting campaigns expected.
Large Corporations and Complex Partnerships
Large businesses, multinational corporations, and complex partnerships are a central focus. The IRS is developing specialized teams and using advanced analytics to detect abusive transactions, transfer pricing issues, and basis-shifting schemes. Anticipate deep audits of complex or opaque structures, as well as staffing increases and regulatory clarifications in this area.
Digital Assets and Emerging Industries
IRS enforcement of cryptocurrency and digital asset reporting will intensify, including implementation of new broker reporting rules. The agency has issued proposed regulations and transitional guidance for the 2025–2026 cycles. Mismatched reporting could trigger audits, and finalized digital asset compliance rules are expected soon.
Employment Tax Compliance
The IRS, in collaboration with the Department of Labor, is prioritizing enforcement against worker misclassification. This increases the risk of reclassification, penalties, and back taxes. Joint enforcement actions are anticipated, especially for industries with large contractor workforces.
Abusive Transactions and Tax Schemes
Syndicated conservation easements, micro-captive insurance, and other abusive tax shelters remain in focus. The IRS has issued public guidance narrowing loopholes and warning promoters. Audits and litigation continue to be a significant risk, making it essential to monitor IRS guidance and public notices.
Technology-Driven Enforcement
The IRS is deploying advanced data analytics, AI, and cross-matching across financial networks to flag noncompliance. Even small errors may now trigger enforcement. Expanded automation is a central feature of the IRS’s Strategic Operating Plan.
Service Improvements Paired with Enforcement
The IRS has committed to reducing call wait times, expanding digital services, and simplifying correspondence. While these upgrades improve service, they also allow compliance errors to be identified more efficiently, pairing stronger taxpayer service with intensified enforcement.
Conclusion
The IRS’s enforcement strategy for 2025–2026 combines high-impact initiatives with modernized technology and clearer guidance. High-income individuals, large corporations, complex partnerships, and digital asset holders face heightened audit risk. At the same time, the reduction in workforce is likely to shift enforcement toward automation, analytics, and targeted oversight.
At Kundra & Associates, we help clients across Washington, D.C., Maryland, Virginia, the U.S., and internationally navigate IRS audits, compliance challenges, and enforcement actions. Our team brings decades of experience in tax litigation, audit defense, international tax compliance, and penalty disputes—helping you stay prepared in an evolving enforcement landscape.