In the midst of tax season, a time when Americans are anticipating tax refunds to boost their finances, the Internal Revenue Service (IRS) has been making some startling changes to its workforce.
Last month, the IRS fired 7,000 employees across the country. The job cuts impacted employees in tax compliance departments, who have worked at the organization for about one year or less, according to a report from the Associated Press.
💰💸 Don’t miss the move: Subscribe to TheStreet’s free daily newsletter💰💸
Employees who work in these departments are tasked with ensuring that taxpayers adhere to tax laws, correctly report their income, file their returns, pay taxes, etc.
Related: IRS makes a startling change that could impact tax returns
The job cuts at the IRS raised eyebrows as it sparked concern that tax return processing rates could slow down, especially since the agency is already understaffed with about 90,000 employees nationwide.
According to the IRS, the agency has received about 42.7 million tax returns and processed roughly 42.3 million as of Feb. 21.
Now, it appears that the IRS might be planning another round of job cuts; this time, a larger portion of its workforce could be affected.
IRS plans another major change, raising alarm bells
According to a new report from AP News, the IRS is contemplating cutting half its workforce through layoffs, incentivized buyouts, and attrition, also known as a hiring freeze.
If the IRS implements this plan, it could potentially slow down the processing of tax returns. It would also create uncertainty about the future of taxpayer assistance programs and how they will operate with significantly fewer staff members.
Tax forms, a calculator and a pen are seen in this photo.
For example, the IRS Direct File program could potentially be at risk. The program offers a new tool that allows taxpayers to electronically file their federal taxes for free directly on the IRS website. It was first piloted last year and is currently available in 25 states.
Other IRS taxpayer assistance programs that may be impacted by the job cuts include Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Both offer free tax return preparation for people who make $67,000 or less, live with disabilities, or speak limited English.
Trump administration has major plans for the IRS
The move from the IRS comes after Elon Musk, who runs the Department of Government Efficiency (DOGE), and President Donald Trump have been on a mission to shrink the federal government in an effort to “enhance accountability, reduce waste, and promote innovation,” according to a Feb. 19 executive order signed by Trump.
Their efforts to reduce the size of the federal government so far has resulted in over 32,900 government employees being laid off and over 110,210 total federal departures, according to data from Layoffs.fyi.
Related: JPMorgan executive sends a harsh wake-up call to employees
In an interview with Fox News on Feb. 19, U.S. Secretary of Commerce Howard Lutnick said that Trump plans to abolish the IRS and replace it with a service that collects revenue from tariffs, which would fund the U.S. government.
“Donald Trump announced the External Revenue Service and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay,” said Lutnick in the interview.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price hikes. On March 4, Trump increased his previous 10% tariff on all goods imported from China to 20%. He also imposed 25% tariffs on all goods imported from Mexico and Canada.
More Labor:
Meta’s recent layoffs take an unexpected turnGoldman Sachs defends a work policy shareholders fearDell CEO sends a stern wake-up call to employees
As Trump’s plan for the IRS unfolds, his administration is also looking to deputize IRS agents to assist with immigration enforcement efforts.
In a memo sent to Treasury Secretary Scott Bessent on Feb. 7, Department of Homeland Security Secretary Kristi Noem requested approval to use qualified IRS agents to help with investigating cash flows of human trafficking organizations, auditing businesses accused of hiring undocumented immigrants, and seizing properties “tied to immigration-related offenses.”
“It is DHS’s understanding that the Department of the Treasury has qualified law enforcement personnel available to assist with immigration enforcement, especially in light of recent increases to the Internal Revenue Service’s workforce and budget,” wrote Noem.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
