President Donald Trump’s attempt to hollow out the IRS workforce revealed a major flaw. Who’s going to process millions of tax returns in their absence?
The Trump administration fired approximately 6,700 IRS workers on February 20, smack in the middle of the 2025 tax filing season. While they comprise a sliver of the tax agency’s approximate 100,000 full-time employees — internal sources say some worked in crucial areas such as auditing and compliance teams.
This comes barely two weeks after the president’s downsizing “efficiency” head Elon Musk said workers essential to tax filing must work until May 15 even if they accepted the Trump administration’s controversial federal employee buyout offer, the deadline of which was put on hold temporarily by a federal judge.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Federal employees exempt from the buyout through the tax filing season include people in Taxpayer Services, Information Technology, and the Taxpayer Advocate Service. These are teams comprised of professionals responsible for operations support, direct customer assistance, accounts management, and run compliance checks, to name a few functions.
They also manage tax returns across the seven processing centers — Andover, Atlanta, Austin, Cincinnati, Fresno, Kansas City, and Ogden. The IRS expects more than 140 million individual tax returns for tax year 2024.
The IRS has been known to siphon employees from other departments to meet tax filing deadlines in previous years, and the latest downsizing efforts are troubling.
Here’s what downsizing the tax agency can mean for you and your taxes, based on problem areas the IRS has been working to improve.
Continued delays in IRS in ERC claims processing
If you’re still waiting on your ERC refunds, you won’t want to hear this.
As of last fall, the IRS still faced a backlog of about 1.2 million Employee Retention Credit (ERC) claims, with many pending for more than a year.
The ERC is a pandemic-era refundable credit enacted to encourage businesses to keep their employees on payroll during the COVID-19 crisis. As previously reported by Kiplinger, abusive promoters advertised the ability to claim the ERC to unsuspecting employers, leading to a surplus of ERC fraud and erroneous claims.
The IRS restarted processing ERC claims following a one-year pause, but it’s been slow to reduce its backlog. At one point, the agency encouraged taxpayers to participate in a temporary Voluntary Disclosure Program to self-correct improper ERC claims at a discount.
The IRS claim withdrawal remains open. So far, there’s no clarity on whether pending cases will be resolved soon.
To say the least, some outstanding businesses aren’t happy. The tax agency was sued for millions over prolonged delays back in October 2024, and more lawsuits may pile up.
If the Trump administration gets enough IRS employees to voluntarily resign or issues furloughs in the future, there’s no telling when people will get their ERC claims resolved.
For more information see: IRS Sued for Millions Over Employee Retention Credit (ERC) Delays.
Identity theft delays may worsen
A judge temporarily blocked Tesla and SpaceX CEO Elon Musk from accessing the U.S. Treasury Department’s payment system. Musk gained temporary access to the department’s sensitive information system, raising alarm bells of fraud risk.
The tech billionaire is Trump’s appointed head of the newly created Department of Government Efficiency (DOGE), which aims to cut government spending and reshape the federal workforce.
The Treasury Department has information containing your name, address, Social Security number, and government payments including your Social Security check. So if there’s a breach, will the IRS be able to handle it?
The IRS closed the door on more identity theft cases last year, but the average time to reach a resolution and process refunds to affected victims was nearly two years.
At the end of 2024, the IRS had a total inventory of over 470,000 Identity Theft Victim Assistance (IDTVA) cases to triage, according to the National Taxpayer Advocate (NTA).
The delays were once again due to staffing shortages. Last year, the IRS temporarily reassigned staffers from IDTVA processing to answer phone calls in Taxpayer Services during tax season to achieve better customer service response times.
This year, the IRS again made the business call to siphon IDTVA employees from identity theft casework to answering phones during the 2024 filing season.
- In total, the IRS lost 552 IDTVA employees to attrition in FY 2023 and 2024
- During the same time, it hired 663 new employees
If you’re a victim of tax-related identity theft, Trump’s plan to reduce the workforce could mean you may have to wait even longer to resolve your case. It may also mean that your calls to the IRS customer service will go unanswered.
General processing delays
Reducing the IRS workforce may negatively impact customer service toll lines and processing of paper returns.
- 66% of taxpayer mail was delayed and considered late by the end of 2024
- It took 20 days, instead of 13 days to process paper returns last year
- Manual reviews could take as long as 180 days
According to the Taxpayer Advocate, only 32% of callers reached an IRS employee last year during tax season, and 29% of callers reached an employee during the full year. That was better than in previous years, but it still required reassigning employees from other departments to answer phone calls.
The Trump administration’s hiring freeze on the federal government doesn’t help. Not to mention, the hiring pause on the IRS is indefinite.
Bottom line on Trump IRS plans
The IRS has struggled to overcome staffing shortages for decades, and the Trump administration’s goal to shave down the federal workforce may crumble its progress.
The tax agency has faced continued challenges in employee recruitment, hiring, training, and retention, according to an analysis by the Taxpayer Advocate. For many key areas within the IRS, the clock is ticking.
An estimated 63% of the current IRS workforce is eligible to retire within the next six years, according to the 2024 NTA annual report to Congress. Over the past two years alone, at least 16% to 36% of employees have left Taxpayer Services, depending on the job position.
Separately, the IRS just lost another $20 billion in key funding which may impact the agency's capability to audit certain groups, mainly wealthy individuals. Republicans have also pushed the idea of abolishing the IRS.
All of these changes may impact taxpayers like you as you wait for your tax returns to be filed and processed in upcoming years. So stay tuned.
Related Content:
- Trump Buyout Offer Paused Before Deadline: What It Means for You Now
- Trump Wants You Out of the IRS, But You’ll Have to Wait Until May
- No New IRS Agents? What Trump’s Federal Hiring Freeze Means for Your Tax Return
-
Market Fees Could Be Costing You — Here’s How to Avoid ThemSome money market accounts charge more than they earn. Here's how to spot costly fees and choose smarter savings options.
-
The Role of a Mortgage Underwriter in Buying a HomeFrom fast-track approvals to manual reviews, here’s what to expect (and how to avoid delays) in the underwriting process.
-
I’m Over 65 and Itemize: Can I Claim the New $6,000 ‘Senior Bonus’ Tax Deduction?Tax Changes If you’re an older adult, a new bonus deduction could provide a valuable tax benefit.
-
Another State Rebels Against Trump’s New 2025 Tax Law: What Now?State Taxes Even if states adopt tax policies in the so-called ‘big beautiful bill,’ lawmakers may have workarounds at their fingertips.
-
Ask the Editor, August 29: Tax Questions on Estate and Gift TaxesAsk the Editor In this week's Ask the Editor Q&A, we answer questions from readers on estate and gift taxes.
-
Is Trump's Tax Plan Speeding Up the Looming Social Security Funding Crisis?Social Security Social Security's combined retirement funds are running out of cash, and its insolvency date is expected to occur in less than a decade.
-
New Trump Tax Bill: Five Changes Homeowners Need to Know NowTax Changes Trump’s new tax legislation is reshaping how tax breaks for homeowners work.
-
Is the ‘Pumpkin Spice Tax’ Coming for Your Fall Coffee Budget?Food Taxes Inflation pressures, tariffs, and talk of the so-called 'pumpkin spice tax' have some wondering about rising coffee prices.
-
Will You Get a ‘Surprise’ Tax Bill on Your Social Security Benefits in Retirement?Retirement Taxes Social Security benefit payments might land you in hot water when filing 2025 taxes — here are three reasons why.
-
Ask the Editor, August 22: Tax Questions on What Congress Will Do NextAsk the Editor In this week's Ask the Editor Q&A, we answer questions from readers on what Congress will do next with taxes.
