Tax season, when many Americans anticipate tax refunds from the Internal Revenue Service (IRS) to boost their finances, officially concludes in a little less than a month.
According to the IRS’ website, it has so far processed roughly 60.7 million tax returns this year. Also, the average tax refund amount is $3,324, about 5.7% higher than last year’s average.
As more Americans race to file their taxes before the April 15 deadline, the IRS has been undergoing major changes to its workforce, powered by the Trump administration, which is raising alarm bells.
Related: IRS plans alarming move that threatens tax returns
Last month, the IRS fired 7,000 employees nationwide. 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. These departments ensure taxpayers adhere to tax laws, correctly report their income, file their returns, etc.
Also, earlier this month, AP News revealed that the IRS is planning to slash its workforce of about 90,000 employees in half through layoffs, incentivized buyouts, and attrition (a hiring freeze).
The IRS contemplates a startling change, raising concerns
Now, it appears that the IRS’ plan is taking full effect as its workforce is about to get even smaller.
According to a new report from The Washington Post, the IRS plans to cut over 20% of its Taxpayer Advocate Service branch staff. This sector is responsible for helping Americans who are facing financial issues, have been a victim of identity theft, or are facing other tax-related issues.
The Tax Withholding Estimator is a free IRS tool that can help you figure out your federal income tax withholding.
Jonas Walzberg/picture alliance via Getty Images
The job cuts will result in the Taxpayer Advocate Service losing 430 of its roughly 1,900 employees, and the plan is in the final stages of being enforced, according to the Post. If the plan goes through, the IRS’ overall workforce will be 18% smaller in mid-May compared to its size in January.
As the IRS continues to chop down its workforce, the processing of tax returns can slow down. It could also put the future of certain taxpayer assistance programs and how they will operate at risk as significantly fewer staff members will now man them.
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For example, the IRS’ Direct File department is set to lay off 30% of its employees by May 15, which could put the IRS Direct File program 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.
The Taxpayer Experience Office, which works closely with the Taxpayer Advocate Service, will also cut 50% of its staff by May 15.
According to its website, this office is responsible for identifying areas in “current taxpayer-facing processes that need continuous improvement, in real time, to eliminate systemic breakdowns before they harm taxpayers. “
The IRS’ job cuts could have major consequences
The IRS’ plan to further shrink its workforce comes after Elon Musk, who runs the Department of Government Efficiency (DOGE), and President Donald Trump have been on a mission to downsize the federal government in an effort to “enhance accountability, reduce waste, and promote innovation,” according to a Feb. 19 executive order signed by Trump.
So far, over 36,000 government employees have been laid off by DOGE and over 113,000 federal employees have departed, according to recent data from Layoffs.fyi.
Trump and Musk watch the launch of the sixth test flight of the SpaceX Starship rocket on November 19, 2024 in Brownsville, Texas.
Erica Payne, founder of Patriotic Millionaires, claims that the IRS’ layoffs can harm the agency’s revenue.
“If Elon Musk and DOGE want to cut waste and improve ‘government efficiency’ as they claim, they would be fighting tooth and nail to protect the IRS,” said Payne. “Unlike with other federal agencies, when you cut funding and staff at the IRS, you ultimately end up with less revenue. This is because, for every $1 the agency spends on audits, they collect $6 back; and for every $1 the IRS spends auditing wealthy households and corporations, they get a whopping $12 return.”
Payne also said that it is vital for the IRS to have the proper funding since it can close the nation’s estimated tax gap.
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“If the IRS had sufficient funding, it would undoubtedly go a long way in closing the nation’s estimated $700 billion tax gap, i.e., the difference between taxes paid and taxes owed,” she said. “It would also particularly help to crack down on high-income tax cheats, as the top 1% of earners alone are responsible for no less than $160 billion of the tax gap.”
In an interview with Fox News on Feb. 19, U.S. Secretary of Commerce Howard Lutnick said that Trump aims 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 increases.
Earlier this month, Trump increased his previous 10% tariff on all goods imported from China to 20% and imposed 25% tariffs on all goods imported from Mexico and Canada.
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