POLITICS & GOVERNMENT

DOGE, Palantir and the IRS: What Could Go Wrong?

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Palantir and the IRS: Musk, left, Thiel, right

 

Who’s watching the IRS code?

By CPA Trendlines Research

The IRS’s Unified API Layer may be the cornerstone of a digital-first tax administration, even as key voices inside and outside the agency raise red flags about transparency, security, and oversight.

MORE Tax | Mounting Delays Undermine Public Trust in IRS Refund Process | Brace Yourself: IRS 25% Staff Cuts Mean Big Trouble for Tax Pros and Clients | What to Watch in the One Big Beautiful Bill  | IRS’s Big Annual Report: Already Out of Date as Agency Grapples with Chaos and Cuts | Busy Season Barometer Stats: Who’s Responding and How They’re Doing | Accountants Reporting a Pretty Good Year | Tax Season Faceplant: Accountants Overrun by Late Chaos

The partnership with the tech industry is triggering a new kind of scrutiny, not over software performance, but civil liberties. At the center of that concern is Palantir Technologies, a data analytics company that confirms it will work with Elon Musk’s Department of Government Efficiency and the IRS on the API infrastructure. READ MORE →

Can DOGE and Palantir Fix the IRS with a ‘Mega API’?

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And what about data security and privacy?

By CPA Trendlines Research

The Internal Revenue Service is developing a Unified API Layer intended to consolidate access across its fractured legacy systems, a move that could transform the agency—if executed with transparency, speed, and user needs in mind.

MORE IRS | Brace Yourself: IRS 25% Staff Cuts Mean Big Trouble for Tax Pros and Clients | What to Watch in the One Big Beautiful Bill |IRS’s Big Annual Report: Already Out of Date as Agency Grapples with Chaos and Cuts | Busy Season Barometer Stats: Who’s Responding and How They’re Doing | Tax Season Faceplant: Accountants Overrun by Late Chaos

The project gained momentum–and sparked controversy–this year with the Department of Government Efficiency and Palantir Technologies aiming to build a comprehensive API system.

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Five Million IRS Refunds Delayed by Staff Cuts

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Still, better than 21 million in 2022 pandemic.

By CPA Trendlines Research

2025 Filing Season by the Numbers
Individual Returns Received 140.6 million
Refunds Issued 86.1 million
Total Refund Dollars $253 billion
Average Refund $2,942

Issuing $49 billion more in refunds than last year, the Internal Revenue Service processed over $253 billion in refunds during the 2025 filing season, with 86.1 million refunds issued and an average check of $2,942, according to the National Taxpayer Advocate’s 2026 Objectives Report to Congress.

MORE IRS | Brace Yourself: IRS 25% Staff Cuts Mean Big Trouble for Tax Pros and Clients | What to Watch in the One Big Beautiful Bill |IRS’s Big Annual Report: Already Out of Date as Agency Grapples with Chaos and Cuts | Busy Season Barometer Stats: Who’s Responding and How They’re Doing | Tax Season Faceplant: Accountants Overrun by Late Chaos

In 2022, the IRS faced a substantial backlog, with over 21 million delayed refunds, primarily due to pandemic-related challenges and a surge in paper filings. By 2023, improvements in processing systems and staffing helped reduce the backlog to approximately 1.9 million delayed refunds. However, in 2025, delayed refunds rose again to over 5 million, slowed by headline-making staff cuts and an uptick in identity theft cases requiring additional verification.

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IRS Phone Stats Improve—Unless You’re a Tax Pro

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What “Priority Service”? Only 61 percent of practitioner calls get through.

IRS Phone Line
Level of Service
Accounts Management
87%
Practitioner Priority Service
61%
Installment Agreement / Balance Due
35%
Identity Theft
29%
Critical support lines remain overwhelmed.

By CPA Trendlines Research

The Internal Revenue Service reports significant improvements in its phone service, but the gains mask critical shortfalls in other high-demand lines, frustrating taxpayers and practitioners alike.

MORE IRS | Brace Yourself: IRS 25% Staff Cuts Mean Big Trouble for Tax Pros and Clients | What to Watch in the One Big Beautiful Bill |IRS’s Big Annual Report: Already Out of Date as Agency Grapples with Chaos and Cuts | Busy Season Barometer Stats: Who’s Responding and How They’re Doing | Tax Season Faceplant: Accountants Overrun by Late Chaos

Despite improvements in certain areas, such as the Accounts Management lines achieving an 87 percent Level of Service with average wait times dropping to 3 minutes, other critical lines experienced significantly lower service levels. For instance, the Identity Theft line had an LOS of just 29 percent, and the Installment Agreement/Balance Due line stood at 35 percent.

However, performance plummets for other phone lines. The Level of Service on the Identity Theft line was just 29 percent, and on the Installment Agreement/Balance Due line, it was 35 percent.

The Practitioner Priority Service line, heavily used by professionals, managed just 61 percent, well below the standard for acceptable support.

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‘Kryptonite:’ IRS Buried under 8 Million Paper Returns

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2025 season leaves 8.2 million unprocessed returns and a backlog of 750,000 correspondence cases.

Return Type
Scanned by April 18
Form 1040
~1%
Form 940
~9%
Form 941
~13.5%
Far behind digital processing goals.

By CPA Trendlines Research

Despite modernization efforts, the IRS is drowning in paper, which the National Taxpayer Advocate calls the agency’s “kryptonite.”

MORE Tax | Brace Yourself: IRS 25% Staff Cuts Mean Big Trouble for Tax Pros and Clients | What to Watch in the One Big Beautiful Bill  | IRS’s Big Annual Report: Already Out of Date as Agency Grapples with Chaos and Cuts | Busy Season Barometer Stats: Who’s Responding and How They’re Doing | Accountants Reporting a Pretty Good Year | Tax Season Faceplant: Accountants Overrun by Late Chaos

During the 2025 filing season, the IRS scanned fewer than 1 percent of paper-filed Forms 1040, falling drastically short of its Paperless Processing Initiative goals. This continuing reliance on paper adds months to the processing cycle. In addition to return delays, it clogs the system for identity theft resolution, amended returns, and refund claims, each requiring manual review. For tax professionals, the paper problem means longer timelines, more uncertainty, and higher support costs.

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