The IRS is undergoing one of the biggest shake-ups in its history, with major cuts to staffing, shifting budgets, and a heavy push toward new technology. These changes could affect everything from how quickly your return is processed to how audits are handled. Here’s a breakdown of what’s happening—and why it matters for taxpayers and businesses alike.
“Is the IRS being dismantled?
The IRS has faced sweeping workforce reductions in 2025, affecting nearly every division. By the close of tax season, more than a quarter of the agency’s employees were gone through layoffs, buyouts, or attrition. Leadership has been equally unstable, with five interim commissioners so far this year. The most recent shuffle saw Billy Long appointed and removed almost immediately, followed by Treasury Secretary Scott Bessent stepping in as acting commissioner.
At the start of the year, the IRS employed more than 102,000 federal workers. Six months later, that number fell to just 75,702. The Trump administration has also proposed a 20% reduction in IRS appropriations for next year, which, combined with the phase-out of Inflation Reduction Act (IRA) supplemental funding, represents a 37% cut overall.
The impact is particularly acute among auditors. Roughly 31% of revenue agents—about 3,600 auditors—have left or been terminated in just the first quarter of 2025. This steep decline could result in fewer and slower audits, raising concerns about tax compliance and underreporting.
In short, IRS auditors have borne the brunt of the agency’s contraction. While the full effects on audits and compliance remain unclear, ongoing litigation and policy decisions will shape what comes next.
What’s Next?
The IRS is undergoing significant workforce reductions, with further cuts under consideration, according to recent reports and budget proposals. Projections indicate that staffing levels could decline by as much as 50%, from more than 100,000 employees in January 2025 to an estimated 35,000–40,000 by the end of the year.
The IT division is expected to see the sharpest reductions, with staffing potentially reduced by 70%. This would directly affect the level of support available for processing returns and maintaining critical systems.
So, how does the IRS plan to continue collections and service delivery without all these people?
According to the administration, the IRS plans to rely on Artificial Intelligence and other technologies to help manage tax return processing, audits, and customer service. Whether these tools will prove effective remains uncertain.
While the IRS continues to share data on its efforts to serve taxpayers and enforce compliance, the recent staffing cuts raise concerns about the agency’s ability to sustain and improve performance in the future.
Some area metrics for the IRS:
Taxpayer Service
- Reduced call wait times
- Higher phone answer rates
- Expanded online services, including more website visits and handled inquiries
- Continued in-person assistance in key locations
Enforcement and Compliance
- Tax Revenue Collected
- Enforcement Revenue
- Tax Gap Monitoring: Ongoing tracking of the gap between taxes owed and paid
- Audit Activity: Thousands of audits closed, resulting in billions in recommended additional taxes
- Delinquent Collections: Billions recovered from delinquent returns and unpaid assessments
The question is whether these service levels can be sustained with such a dramatic drop in staffing.