Layoffs are occurring at the IRS in Washington, D.C., and across the nation, coinciding with the peak of the 2025 tax filing season.
These personnel reductions are part of the Department of Government Efficiency’s initiative to decrease the deficit by $1 trillion. This effort has commenced with widespread layoffs at numerous government agencies, potentially leading to future legal challenges.
Charles Rettig, a former IRS Commissioner under President Donald Trump, stated that the layoffs “should not have a significant impact on current filing season operations.”
However, some experts anticipate possible disruptions.
Michael Kaercher, Deputy Director of the Tax Law Center at NYU Law, suggests that dismissing thousands of IRS employees during tax season inherently poses risks. He notes that while officials claim to avoid firing personnel critical to tax filing, the actual impact remains uncertain until the identities of those laid off are known.
Kaercher outlines potential risks, including delays in tax refunds, reduced capacity to handle phone calls and helplines, and uncertainty about whether the remaining staff possess the necessary expertise to promptly address technical issues that may arise during tax season.
Kaercher also mentions reports of the IRS removing sections from its Internal Revenue Manual, which outlines its policies and procedures. This could hinder taxpayers’ ability to fully meet their obligations.
Kaercher emphasizes that these changes may have lasting consequences for the tax agency, extending beyond the current tax season.
He asserts that layoffs will diminish revenue collection and worsen the budget deficit, as most of the laid-off IRS employees were involved in tax compliance, which prevents tax fraud. Kaercher believes these cuts could incentivize wealthy individuals and large corporations to evade taxes, especially after a decade of substantial budget reductions that have already caused audit rates for high-income earners and large corporations to plummet.
Ed Oswald, a partner at Orrick Law Firm in Washington D.C. and a former attorney-advisor for the U.S. Treasury Department, advises taxpayers to prepare for both the immediate and long-term effects of the IRS cuts, anticipating “less regulation, less clarity and less guidance.”
Oswald recommends maintaining close contact with CPAs or accountants regarding tax returns and diligently documenting all relevant matters. He stresses that even with perceived IRS shortcomings, taxpayers should demonstrate responsiveness and a commitment to resolving issues.
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