IRS marks Tax Day amid worries about layoffs and cutbacks

The Internal Revenue Service commemorated Tax Day this year as the 70th anniversary of the April 15 tax filing deadline, but this year the agency has also been suffering through layoffs, budget cutbacks and high-level departures, including its chief information officer.

The IRS noted on Tuesday that the tax-filing deadline moved from March 15 to April 15 in 1955 to give taxpayers and the IRS more time to prepare and process complex tax returns. However, with the budget cuts and efforts by the Elon Musk-led Department of Government Efficiency to access taxpayer data, the IRS has also paused its technology modernization efforts. IRS CIO Rajiv Uppal is reportedly the latest high-level official to announce his resignation, according to Reuters. He was overseeing the development and improvement of the IRS’s computer and technology systems and is expected to depart later this month. IRS acting commissioner Melanie Krause also recently announced her intention to resign, following the abrupt retirement of former acting commissioner Douglas O’Donnell and the departure of former commissioner Danny Werfel in January. Acting chief counsel William Paul was reportedly removed in March for resisting efforts to share taxpayer data with other agencies like the Department of Homeland Security and its Immigration and Customs Enforcement unit. Chief privacy officer Kathleen Walters also reportedly plans to step down by opting for the Trump administration’s deferred resignation program. 

The high-profile departures come after the approximately 7,000 IRS probationary employees were put on paid administrative leave this year and plans to cut up to 50% of the IRS workforce after tax season. The National Treasury Employees Union has been warning of the impact of the cutbacks.

“NTEU is incredibly proud of the IRS employees who persevered despite attacks on their jobs and their agency and helped deliver a smooth filing season for millions of taxpayers and business owners,” said NTEU national president Doreen Greenwald in a statement. “But the success feels precarious as the administration plans a forthcoming firing spree that will cripple the agency’s ability to serve the American people, before, during and after the filing season.”
 
The NTEU noted that the Trump administration has already removed about 7,000 probationary IRS workers, and the Treasury has announced plans for a broader reduction-in-force that could impact thousands more IRS employees across the country.

“It is not speculation to say that a gutted IRS helps fewer taxpayers file their returns, slows their refunds, and allows tax cheats to thrive, because we saw all three of those things the last time Congress eviscerated the IRS budget and shrunk the workforce,” Greenwald said. “This administration is intentionally rolling back the recent progress and returning the IRS to the days of long wait times on the phone, case backlogs and uncollected taxes. Administering the tax code is a labor-intensive process, and indiscriminately firing thousands of IRS employees will weaken the system that is responsible for 96 percent of the government’s revenue.”

The smaller the IRS workforce, the less tax revenue is collected, according to a new analysis by the nonpartisan Budget Lab at Yale University. The Treasury has not announced specific figures for the reduction-in-force, but if the agency were to lose 18,200 employees, the government would save $1.4 billion in 2026 but collect $8.3 billion less in taxes, for a net revenue loss of $6.8 billion. Over 10 years, if the job cuts are maintained, the net lost revenue would amount to $159 billion.

The Urban-Brookings Tax Policy Center held a webinar Tuesday to discuss how the large reductions in the IRS’s funding and staffing would affect taxpayers, as well as the successive buyout offers under the Deferred Resignation Program. 

“What we do know before we get into potential future layoffs is that 11,000 IRS employees out of about 100,000 had initially taken the buyout or been laid off in February, and now another 20,000 we’ve been told this morning are taking another buyout, so a total reduction so far of 30,000 employees out of 100,000,” said Tracy Gordon, vice president for tax policy, codirector and acting Robert C. Pozen Director, Urban-Brookings Tax Policy Center, citing recent articles from Bloomberg and the Washington Post.

Barry Johnson, a former chief data and analytics officer at the IRS who is now a nonresident fellow at the Urban-Brookings Tax Policy Center, discussed the progress that the IRS had been making in its technology efforts before the cutbacks. They included introducing interactive chatbots that used AI to interpret taxpayer questions and link them to the appropriate content on its website, expanding online account capabilities for individuals, businesses and tax professionals, introducing the Direct File system for free online tax filing, and improving the IS’s enterprise case management system. 

“One of the big goals we were working on was to make our data more interoperable and accessible to support modernization, while greatly improving the security of all of our data systems,” said Johnson. “We were making progress in releasing statistics in closer to real time and to automate some of our statistical processes. And we were laying the groundwork to support evidence-based policy making and program evaluation at all levels of government, again, while ensuring the protection of individually identifiable tax data.”

Much of the extra funding for IRS enforcement, taxpayer service and IT modernization has already been cut by Congress or is in the process of being zero’ed out, but the plans are unclear.

“There are many unknowns for personnel, for funding, which according to your charts, may actually be close to zero for modernization right now,” said Pete Sepp, president of the National Taxpayers Union. “The IRA funds may have run out by about out for modernization, and we have zero in appropriations. How in the world is anything going to press forward in that environment? Maybe it can, but we want to see the plan.”

Technology can only go so far in helping taxpayers navigate the IRS. “What we don’t see now is what’s going to be happening going forward,” said Nina Olson, executive director of the Center for Taxpayer Rights and a former National Taxpayer Advocate at the IRS. “How do they propose to improve taxpayer service? Are they going to use AI to eliminate calls? Everybody’s been trying to eliminate the calls since the phone system was set up, and all it does is increase. Maybe you can eliminate some of the repeat callers, the more that you do chatbots and things. But as I keep saying to people, the IRS isn’t like Amazon or your bank. It has enforcement powers that no bank has. And if you’ve ever tried to get a problem resolved with Amazon or any one of these online deliveries, good luck with that. The chat system doesn’t really work really well, and that’s what drives people to the phones. They want to hear from somebody that their issue has been resolved.”