Karla Dennis has spent two decades guiding anxious taxpayers through IRS bureaucracy.
But this year, the enrolled agent and chief executive of KDA Tax Consulting is fielding an unusually high volume of questions about the tax season – and it’s not even December yet.
For example, one of her small business clients requested a new PIN from the agency months ago. With W-2s due in just over a month, the owners are still in limbo.
‘They still don’t have that resolved,’ Dennis told the Daily Mail. ‘So, they can’t file their taxes electronically.’
They are not alone.
Dennis says people in her line of work end up acting like emotional triage for clients, and calls tax professionals ‘second responders’ – not the person who shows up to a fire or medical emergency, but the one who helps guide taxpayers through the emotions of IRS bureaucracy.
She believes a three-part collision of government paralysis, climate disasters and a scrambled tax code is about to land with a daunting thud on taxpayers’ desks in early 2025.
‘Oh, it’s absolutely going to be a nationwide hot mess,’ she told the Daily Mail.
Dennis said she is preparing to help her clients wade through a ‘national hot mess’ of taxes
The IRS didn’t respond to the Daily Mail’s request for comment. Here are the issues that Dennis’s clients are worrying about:
1. A rewired tax code nobody knows how to use
A newly overhauled tax system – reshaped by the One Big Beautiful Bill – is set to usher in some of the most dramatic changes to federal wage taxation in years.
Donald Trump promised two headline reforms: limiting federal tax collection on tipped wages and on overtime. Both passed.
Under the new law, employees can deduct up to $25,000 in qualified tips and up to $12,500 in overtime pay.
The IRS has acknowledged that many employers lack the information, systems, or procedures needed to comply with new reporting requirements, and says it will not penalize employers, essentially declaring this year a grace period while businesses update their payroll systems.
But Dennis says the rules around how to actually report those earnings are murky at best.
Perhaps most alarming, she says, the government is essentially operating on trust until it changes its own reporting documents in 2027.
‘It’s sort of like, “report what you think you should report, and keep your records,”‘ she said.
Dennis says employers should keep as much paperwork as possible and said she will be scrutinizing her clients’ paperwork to ensure everyone is properly reporting their taxes.
But she said there are obvious loopholes that taxpayers will try to exploit.
Dennis, an enrolled agent and chief executive of KDA Tax Consulting, said there are three main issues with 2025 tax returns: new rules, the recent government shutdown, and paperwork after recent natural disasters
‘I can hear next year’s labor reports already: “Overtime went up substantially!”‘ she added, half-joking.
To Dennis, it’s déjà vu. She points to 2020, when Covid shutdowns prompted Congress to create the Paycheck Protection Program – a massive emergency plan that quickly became synonymous with bad paperwork and opportunistic fraud.
She worries the no-tax system for tips and overtime is headed the same way.
‘There’s going to be room for people to falsify this, just like with the employee retention credits during Covid,’ she said.
2. The shutdown still looms over everything
The nation just crawled out of the longest government shutdown in US history – and Dennis says the IRS is still digging out from under it.
Even before the 43-day shutdown began, many of her clients were already waiting on delayed paperwork.
When federal workers were locked out of their offices, those cases simply froze.
For taxpayers who have already been anxiously waiting, weeks have stretched into months.
Some IRS notices claimed issues would be resolved in ‘four to six weeks,’ but Dennis says many of her clients have heard nothing after 20 weeks or more.
‘This is a systemic problem,’ she said.
She spends much of her time calming down small business owners who think they’ve done something wrong.
‘I tell them we’re going to resolve this with time. I have dealt with this for multiple years, and as much as this is personal peril to you, you’re not the only one.’
Small businesses in California, she said, have been hit especially hard.
Thousands of homes and businesses burned to the ground during January’s Palisades Fire in California. Dennis said important financial information was scorched with the structures
3. Natural disasters have turned paperwork into chaos
For clients in disaster zones, the stress is multiplied.
In Los Angeles – Dennis’s hometown – the Palisades Fire ripped through neighborhoods, torching more than 6,800 structures, including homes, shops, and small businesses.
Financial records burned with them.
Dennis says many fire survivors were about to face a puzzling new tax season without the complexity of their now-damaged receipts.
And, those who received government aid, including FEMA relief, must count those benefits as part of their 2025 filings.
For thousands of residents filing for government assistance for the first time, tax season won’t feel anything like it used to.
This year, they’ll have to navigate filing new sources of income on top of trying to recreate a lot of financial records.
And, in the lead-up to all of these difficult questions, Dennis says most IRS workers who survived earlier layoffs at the agency are heading for vacation between Thanksgiving and New Year’s Day.
‘Of course, the IRS is not available,’ she said. ‘We’re going to have calamity.’
