The IRS is sinking deeper into controversy after it began its journey of dramatically shrinking its workforce a few months ago.
The agency first fired 7,000 employees in February, impacting workers responsible for ensuring taxpayers follow tax laws, correctly report their income, file their returns, etc.
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On April 15, the day after the tax deadline, the IRS sent a memo warning employees that it is planning to shrink its workforce by 40% through layoffs and buyouts, which will happen in two phases. The first one began last month, and the second one will start in August.
Related: IRS sends stern warning to employees after layoffs
This move is set to shrink the IRS’ headcount from roughly 100,000 employees to between 60,000 and 70,000.
The memo even specifically states that “taxpayer services and compliance will need to be trimmed,” which raises alarm bells about the future of these services and the agency’s ability to operate tax returns.
The Tax Withholding Estimator is a free IRS tool that can help you figure out your federal income tax withholding.
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The IRS plans a controversial moveÂ
During a House Appropriations Committee hearing on May 6, U.S. Treasury Secretary Scott Bessent said that despite layoffs, the IRS will be able to maintain its ability to collect tax revenue by replacing fired workers with artificial intelligence.
“I believe through smarter IT, through this AI boom that we can use that to enhance collections, and I would expect that collections would continue to be very robust as they were this year,” said Bessent during the hearing.
He also emphasized that simply replacing fired workers with new ones won’t be efficient, as it takes time for a person to become “a high-end IRS collections agent.”
Related: Free IRS services taxpayers love face a major threat
“There is nothing that shows historically that by bringing in unseasoned collections agents that it results in more collections or high-end collections,” said Bessent. “It would be like sending in a junior high school student to try to do a college-level class. Becoming a high-end IRS collections agent is something that one grows into.”
The IRS’ plan to further implement AI into its workforce comes after it lost about 11% of its workers in March, according to a recent report from the Treasury Inspector General for Tax Administration.
The report also revealed that roughly 31% of IRS revenue agents, who are responsible for performing audits, have either been fired or accepted a buyout offer during the first three months of 2025.
The job cuts come as Elon Musk, who runs the Department of Government Efficiency (DOGE), and President Donald Trump have been focusing on removing “unnecessary programs” and reducing “bureaucratic inefficiency” from the federal government.
The IRS is following a trend that is making Americans nervous
The IRS isn’t the only entity that’s betting big on AI. Large companies, such as Amazon, Microsoft, and Google, have recently increased their investments in AI development this year.
In a recent interview with The Wall Street Journal, IBM CEO Arvind Krishna even said that IBM has also heavily invested in AI, which has replaced hundreds of HR workers, but has resulted in more hiring at the company.
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“While we have done a huge amount of work inside IBM on leveraging AI and automation on certain enterprise workflows, our total employment has actually gone up, because what it does is it gives you more investment to put into other areas,” said Krishna.
While companies increasingly invest in AI, the technology is making workers across the country very nervous.
According to a recent survey from YouGov, more than one-third of U.S. workers are concerned that AI will result in job loss or decreased work hours.
Also, 56% of workers in the survey believe that AI will decrease the number of job opportunities, and 55% think that their work hours will be reduced due to the technology.
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