Evaluating State Impacts of the IRS Budget Cuts: Mathtech’s Free Federal Impacts Assessment (FIA)
The IRS budget cuts of $20 billion, along with halted modernizations and 20,000 eliminated positions, may seem like a federal issue… but state tax agencies will feel the effects directly. From delayed data exchanges to weakened enforcement partnerships, the consequences will ripple across joint programs.
Have you evaluated how your agency will be impacted? Do you have an inventory of programs, data exchanges, and key contacts?
Programs That May Be Affected
The changes at the IRS could jeopardize the coordination and data pipelines that support core state functions, including:
- Federal/State Tax Information Exchange – Used for state audits and enforcement.
- Combined Federal/State Filing Program – Prevents duplicate 1099 reporting burdens.
- Federal/State Electronic Filing (Joint E-File) – Allows seamless transmission of returns.
- Treasury Offset Program (TOP) – Enables intercepts for unpaid state tax debts.
- State Audit Report Program (SARP) – Sends state audit leads back to the IRS.
- QETP (Employment Tax) – Flags worker misclassification and cash-pay schemes.
- Security Summit & ISAC – Shares identity theft and refund fraud alerts.
- CASST – A newer effort focused on tax scam defense across agencies.
Each of these depends on federal staffing, technology, and interagency communication.
What States Should Do Next
Mathtech’s free Federal Impacts Assessment (FIA) helps jurisdictions:
- Pinpoint which programs are most impacted
- Evaluate the risk of reduced federal capacity
- Prioritize and define mitigation plans
The goal: Help states mitigate the risk of reduced federal support while maintaining high tax administration performance and customer service levels.
Navigating Uncertainty with a Trusted Partner
With over six decades of experience working alongside state and federal agencies, Mathtech supports transformation even in challenging environments. If your agency is evaluating the impact of the IRS budget cuts, we can help you move forward with clarity and confidence.
Let’s talk about what that looks like. Reach out to stateteam@mathtechinc.com to see how we can help!