Recent and possible upcoming reductions in force at the IRS by the Trump administration undermine progress made across various compliance enforcement initiatives and hinder the agency’s ability to scrutinize tax evaders, financial transparency policy experts say.
IRS cuts.
President Trump, Elon Musk, and the Department of Government Efficiency (DOGE) in their government-wide campaign to shrink the overall size of the federal workforce have taken several actions to reverse course on the IRS’ expansion and modernization efforts funded by the Inflation Reduction Act’s once-$80 billion, 10-year appropriation.
Approximately 6,700 probationary employees (those in their roles less than a year) were laid off in February shortly after tax season began. A federal judge in California, however, ordered the reinstatement of probationary employees terminated at several agencies — including Treasury — effective immediately.
Reports and rumors of an incoming wave of more IRS layoffs have circulated this month with Tax Day now less than a month out. The Trump administration allegedly is considering laying off up to 50% of the remaining 90,000 IRS employees. Last week, according to CNN, DOGE indicated in an email that 20% could be fired mid-May.
Ramifications.
Executive Director Ian Gary and Policy Director Zorka Milin of the FACT Coalition told Checkpoint in an interview that downsizing the IRS only encourages tax dodgers.
Under former Commissioner Danny Werfel, who was halfway into his five-year term before resigning the day of Trump’s inauguration, the IRS launched several targeted enforcement campaigns to ensure the collection of owed taxes from wealthy individuals, large corporations, and complex partnerships.
Gary said the IRS has “increased its capacity over the last few years” using “lawfully appropriated money” to pursue uncollected tax revenue from these taxpayers. He continued in explaining how these individuals and entities leverage their resources to “hide their taxes or dodge taxes,” including “multinational companies who might engage in illegal transfer mispricing or other complex strategies that cross the line from tax avoidance to tax evasion.”
It is likely, said Gary, that enforcement staff assigned to these projects “are going to be potentially first on the chopping block.” While specifics remain unclear, “it’s fair to surmise that those critical functions of the IRS would be adversely impacted.”
Milin added that these “are some of the more complex audits” and are “quite resource intensive.” The more complicated the tax situation, the more time, money, and expertise is needed to conduct an audit, said Milin. “And we know that some of these cases run into the many billions,” so it is “just not a smart business move to cut these investments that are crucial to raising revenues in a sustainable and fair way.”
The six-month continuing resolution passed by the Senate Friday evening rescinds $20.2 billion from the Inflation Reduction Act funding.
With both Werfel and former acting Commissioner Doug O’Donnell, among other senior IRS leadership, no longer at the agency, the Strategic Operating Plan that outlined spending and hiring benchmarks seems less relevant now, they agreed.
“Working class, middle class” taxpayers will feel the “impact of these cuts,” said Gary. This will come in both the “quality of service that they can expect to receive, and the fact that they will be providing disproportionately more of the revenue for the operation of the federal government than rich taxpayers and corporations.”
Lower-income households reliant on the Earned Income Tax Credit, the Child Tax Credit, and similar incentive programs “historically have been disproportionately … targeted at times when the agency was under resourced,” said Milin. “And I think that’s just not the world that we want to go back to.”
Signals from the administration.
On his first day in office, Trump implemented a hiring freeze for all federal agencies, with extra conditions carved out for the IRS that gives Treasury Secretary Scott Bessent more deference than other agency leaders on when, or if, to resume hiring.
Federal workers were offered buyouts in the form of wage payments through September if they voluntarily resigned, which thousands accepted. An exception applied to tax-season-critical employees, but these exempted workers were given no guarantees as far as job security past filing season. Democrats warn the effects of such instability with the IRS’ staff shakeups will be “catastrophic.”
Bessent did not rule out the possibility of more layoffs in recent interviews and cable news appearances. Michael Faulkender, Trump’s pick for the No. 2 Treasury official under Bessent, also did not provide concrete details in testimony before the Senate Finance Committee during his nomination hearing.
Nonetheless, all signs point to a future with a smaller IRS, which the FACT directors reiterated comes as welcome news for nonfilers and evaders. Gary emphasized that “tax evasion is a crime, and this will allow more tax evasion, invite more tax evasion, because corporations and rich individuals know that there aren’t really the cops on the beat anymore to catch them.”
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