Center for Taxpayer Rights Executive Director Nina Olson, the previous National Taxpayer Advocate, warned that IRS workforce reductions and the agency’s involvement with the Department of Government Efficiency will hinder tax collections, discourage voluntary compliance, and erode taxpayer trust.
Tax season and compliance.
Olson appeared on C-SPAN’s Washington Journal program March 24 and responded to recent reports signaling that the IRS’ workforce could be cut by 20% by May 15, a month after Tax Day, and possibly as much as 50% in total between layoffs and so-called fork-in-the-road resignation buyouts.
She sought to dispel the “myth” that tax season ends after April 15, as 20% of individual taxpayers file extensions to October 15. Should another reduction-in-force take place at the IRS on top of the approximately 6,700 employees terminated in February, a fifth of unprocessed returns would still need to be accounted for, Olson said.
The former taxpayer advocate, who served in the role for 18 years, said “there are a whole bunch of returns that have been stopped by the IRS” and will remain “frozen until the taxpayer can provide the IRS more information or resolve certain issues.” These issues may not be resolved by the close of what is traditionally considered tax season, she explained.
But without IRS staff to work these cases or to assist taxpayers amid the expected cuts, “taxpayers will not get through to the IRS on the phone to be able to resolve their problems,” said Olson. “People will not be able to process their correspondence timely.”
She noted a recent shift at the IRS towards automation, meaning the collection process has become more digital. If taxpayers have an issue with their bill or cannot get in contact with a person at the agency, “the automation kicks in, and the next thing you know, your account is being levied… and you can’t get through to anybody to unwind that.”
While technology has a role to play in modernizing the agency and streamlining certain processes, tax administration cannot be entirely automated, Olson argued. “[T]here needs to be a trained human being who understands the challenges that taxpayers are experiencing and listening to them on the other side.”
Olson said staff cuts on the enforcement side undermine the IRS’ core function in “making sure people pay the correct amounts.” Without “skilled” agents with the training and resources to bring “sophisticated” tax dodgers into compliance, “you’re actually making the whole tax system more unfair,” she continued.
And as the system fails to collect tax revenues from wealthy individuals and large corporations, the “downstream consequence” is that it sends a message to taxpayers that they can avoid paying taxes as well. “The taxpayers will say: ‘Well, the IRS has been gutted, so why do I need to comply with the law? I can do this, I can do that, and they’ll never find me,'” Olson added.
Protection of taxpayer data.
Her organization, the Center for Taxpayer Rights, and government labor unions filed a lawsuit against the IRS, Treasury Department, and DOGE.
Their February 17 complaint filed in the U.S. District Court for the District of Columbia alleges the Trump administration and Elon Musk have “launched a sweeping campaign to access highly-sensitive information systems and dismantle and restructure multiple federal agencies unilaterally.”
An exchange of statutorily protected taxpayer information between the IRS and DOGE violates Code Sec. 6103, the organizations told the D.C. federal court in requesting a jury trial. “Section 6103 requires that tax information, including returns and return information, is to be treated as confidential and subject to inspection or disclosure only when expressly authorized by statute,” read the complaint.
When asked by the C-SPAN host to comment on the case, Olson urged taxpayers “to understand that Congress has said that taxpayer tax returns and tax return information is confidential unless it is expressly authorized” by the Code. It is unclear at this time, she said, exactly how much data has been disclosed by the IRS, how many taxpayers are affected, or what kinds of taxpayer information DOGE now has.
“That’s part of the problem,” said Olson.
But what is known so far is that government public statements have said that “it would be great to get all IRS data and share it with Health and Human Services, share it with the state welfare agencies, [and] create a mega database.”
To Olson, this is reminiscent of the Nixon administration and the infamous Watergate scandal. The fallout of Nixon’s attempt to leverage the IRS against political enemies led Congress in 1976 to enact what remains current law.
Olson said this was done “in order to give taxpayers some assurance that when they gave some of their most personal information to the IRS, [it] wouldn’t be shared elsewhere in the government unless there was a compelling need that Congress decided was a compelling need.”
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