Thousands of employees at the Internal Revenue Service have lost their jobs in recent months. That reduction in the workforce could affect the agency’s essential functions — from audits and collection enforcement to the processing of tax returns and refunds — during the height of tax season.
In February, an estimated 6,000 to 7,000 probationary workers were laid off from the IRS, and reports have indicated the agency may cut as much as half of its roughly 90,000-person workforce in the coming months. On March 13, a federal judge ordered the administration to reinstate thousands of probationary employees it had fired from government agencies, including the IRS, but the final number of layoffs at the IRS will depend on the final court rulings.
“It’s the whole overall federal budget reduction, whether we want to call it coming from DOGE [or] the Department of Government Efficiency, trying to reduce the federal workforce as a mandate from the new Trump administration,” said Tom O’Saben, director of tax content at the National Association of Tax Professionals.
“And it’s happening at a really inopportune time,” O’Saben said. “When you think about what’s the busiest part of the year for IRS personnel, it’s filing season.”
Layoffs could have financial consequences for the IRS, which said it collected more than $5.1 trillion in tax revenue during fiscal year 2024. The agency has been trying to solve the so-called tax gap, which is the amount of money that is owed to the IRS every year but goes unpaid. Figures from the latest IRS data and official testimony estimate the tax gap to be around $600 billion to $1 trillion per year.
Furthermore, there are few government agencies that can match the IRS when it comes to return on investment. According to a 2021 study by the National Bureau of Economic Research, every dollar the IRS spends on enforcement generally brings in $5 to $12 in return.
“If we just think about that for one minute,” said Zorka Milin, policy director at the Financial Accountability and Corporate Transparency Coalition. “If we care about saving money for the government, then going after the part of the government that actually brings in the overwhelming amount of revenue for the government would be among the last things that we would do.”
Watch the video above to find out how layoffs at the IRS could affect the agency’s essential functions and what steps American taxpayers can take to ensure a smooth tax filing season.
