IRS Layoffs Spark Delays, Doubt This Tax Season

The IRS is reportedly preparing to reduce its nearly 100,000 workforce by as much as half through layoffs, buyouts, and attrition — and experts say the disruption is already interfering with this tax season.

Close to 7,000 probationary employees were laid off on February 20, and now the agency is reinstating and placing those workers on paid administrative leave until further notice. That figure adds to about 5,000 IRS employees who have reportedly accepted the Trump administration’s fork-in-the-road deferred resignation offer to cut down federal spending.

As reported by Kiplinger, those deemed critical to the 2025 tax season have been barred from accepting the buyout until mid-May, after the tax filing deadline.

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Now, more layoffs could be on the horizon, as Elon Musk’s Department of Government Efficiency (DOGE) plans to cut as much as 20% of the IRS by mid-May. The billionaire tasked by President Donald Trump to dismantle federal agencies and other spending expects to eliminate about 6,800 more federal workers, barely a month after tax season ends.

The dramatic downsizing could worsen as the IRS is drafting plans to eliminate up to 45,000 of its overall headcount, sources familiar with the matter told the Associated Press. With the 2025 tax season underway, tax experts have noticed signs of trouble at the IRS, from a lack of customer service and delays to audit errors.

Here’s what you need to know about how IRS layoffs can impact you as a taxpayer, based on Kiplinger’s conversations with CPAs and tax experts.

Contacting IRS: ‘Revenue officers becoming a black hole’

When tax season rolls around, the saying “all hands on deck” is not lost at the IRS. The agency has been operating with that approach for years to overcome staffing shortages and successfully process millions of tax returns.

In fact, the IRS has been known to siphon employees from other departments to meet tax filing deadlines in previous years. This year is no different. According to the National Taxpayer Advocate, the agency made the business call to temporarily direct staffers from the Identity Theft Victim Assistance (IDTVA) department to answer phones in Taxpayer Services to handle the high volume of calls during tax season.

As reported by Kiplinger, Taxpayer Services accounts for half of the IRS entire workforce. The agency’s overall headcount had surpassed 100,000 by January, a staffing milestone not seen in 30 years.

But that progress has fallen back in barely two months.

With the recent wave of layoffs shaking up the IRS, some impacted employees likely belonged to the IDTVA. Between fiscal years 2023 and 2024, the department hired 663 new employees. Musk’s firings on February 20 mostly impacted probationary workers who had fewer protections compared to long-term colleagues, which may have included some of those recent hires.

Industry experts across the country have already noticed that it’s getting harder to reach an IRS agent on the phone, putting their clients' tax returns and problems inevitably on hold.

“Typically, when we work a high-value collections case, we are working with a single point of contact for our clients’ case at the IRS known as a revenue officer,” Logan Allec, CPA and owner of tax relief company Choice Tax Relief, told Kiplinger. “All information is passed to, and negotiations done with, this particular individual.”

But what happens when IRS phone lines go unanswered? That’s a question many CPAs and taxpayers are asking themselves this year.

Harder to avoid tax penalties

With fewer employees at the IRS, taxpayers are likely to face more obstacles as they attempt to get their problems solved.

The National Taxpayer Advocate pointed to hiring as one of the IRS's most serious problems in its annual report to Congress this year. The government watchdog wrote that insufficient funding in the IRS and low staffing levels over the past decade have forced taxpayers to deal with:

• Delays in processing returns and refunds
• Reduced access to knowledgeable IRS employees
• Inconsistent application of tax laws and increasing errors

The sudden reduction in IRS staff has sounded alarm bells for one attorney in Michigan, particularly regarding its impact on taxpayers.

“Fewer IRS employees create a big problem for taxpayers when it comes to getting their tax issues resolved,” Stephen Weisberg, principal attorney and founder of The W Tax Group, told Kiplinger. “Tax debt resolutions, including payment plans, Offers in Compromise, levy and lien releases, will take longer, that is, assuming you can get in touch with someone to help you.”

As reported by Kiplinger, only 32% of callers reached an IRS employee last year during tax season, and 29% of callers were able to speak with an employee during the full year. While that is an improvement from previous years, it still required reassigning employees from other departments to assist with phone calls.

“The IRS is already overwhelmed,” Weisberg added. “With even fewer employees, there’s going to be no one to help taxpayers resolve these issues. Penalties will still accrue, as will interest, despite the fact that taxpayers won’t be able to get in contact with anyone in order to resolve their tax debt.”

‘Slow processing and refunds’

Taxpayers, particularly those with more complicated tax returns, often worry about delays.

Those concerns are within reason. It took the IRS an average of 180 days to manually process tax returns last year. Processing paper returns took an average of 20 days, instead of 13. Additionally, 66% of taxpayer mail was delayed and considered late by the end of 2024, according to the NTA.

If you were a victim of identity theft, the average time to reach a resolution and process refunds was nearly two years. Not to mention, the agency still faced a backlog of 1.2 million Employee Retention Credit (ERC) claims as of last fall.

The Trump administration’s hiring freeze and efforts to downsize the IRS are expected to aggravate existing problems. Mainly, ones that will impact your tax experience.

Slow processing will not only hurt responsible taxpayers it would also increase the national deficit if the IRS no longer has the bandwidth to target complicated returns, such as large corporations and higher earners.

A separate study from Yale Budget Lab shows that if the IRS shrinks by 50% — equal to a workforce reduction of about 50,000 people — the agency won’t be able to collect revenues, resulting in as much as $395 billion ($350 billion net) forgone revenue over 10 years. If the staffing reduction leads to an increase in taxpayer noncompliance, revenue losses could rise as high as $2.4 trillion in a decade.

“These layoffs within the IRS could slow processing and refunds; especially more complicated returns,” Thomas J. Cryan, attorney and author of Disrupting Taxes told Kiplinger. “Of greater impact, one can estimate that the reduction in the IRS workforce will undermine and reduce tax revenue collections; which will have the knock-on effect of increasing the annual budget deficit, which in turn will increase the costs of interest on the debt to the citizens.”

‘A focus on low-hanging fruit’

The recent string of IRS layoffs spearheaded by Musk’s DOGE team reportedly impacted thousands of employees who worked in taxpayer compliance, call centers, and the agency’s technology modernization.

While those estimated 7,000 probationary agency workers were recently placed on paid leave until further notice, they are not allowed to work during this tax season. In a letter to Acting IRS Commissioner Melanie Krause, 130 House Democrats warned that the loss of thousands in compliance staff “could cripple progress” and “embolden tax evasion” which would deprive the U.S. of urgently needed resources.

“Unfortunately, to make up for the lost revenue from experienced auditors leaving the agency, we will likely see more of a focus on low-hanging fruit,” Allec told Kiplinger, explaining that these are “less sophisticated and often non-represented taxpayers whom the IRS can essentially railroad in an audit or collections case.”

Some examples of low-hanging fruit where the IRS may focus enforcement efforts on include:

• Individuals behind on their taxes, or non-filers
• Taxpayers on repayment plans

According to Allec, the IRS has a system called Automated Substitute for Return (ASFR), which can calculate a taxpayer's liability. With less staffing, the IRS would have to lean on this automated software to pull in revenue.

“If we see more layoffs at the IRS, I have to believe that more resources will be allocated to the ‘automated’ programs,” he added.

Karla Dennis, an enrolled tax agent and CEO of KDA, Inc. told Kiplinger that the loss of compliance workers could mean fewer audits across the business sector and the wealthy. That’s because more complicated casework often requires a manual review by the IRS and can’t be run through a software service.

“The IRS compliance sector is divided between processing returns and conducting audits,” Dennis said. “Since layoffs seem to be targeting auditors, we can expect a decrease in audits, especially those for small businesses.”

What’s next for the IRS

The IRS workforce could face more shakeups as the Trump administration pushes its goal to reduce federal spending.

To date, the agency has yet to confirm President Trump’s choice for commissioner — ex-congressman and auctioneer Billy Long (R-Missouri). The IRS also demoted the acting chief counsel, William Paul. His position was filled by another IRS attorney Andrew De Mello, who sources say supports DOGE.

Looking toward the future, Trump has suggested abolishing the IRS and replacing the agency with a tariff-led revenue system administered by a so-called External Revenue Service.

However, one fact is for certain: the recent layoffs at the IRS will cause some strain on taxpayers.

"In the short term, most likely it will cause some issues, but the goal is to shake things up and make things more efficient over time,” CFP and tax strategist Matt Chancey told Kiplinger. “No one thinks that agency is efficient today, so it makes sense.”

Chancey, founder of Tax Alpha Title, cited a potential positive: “Will it get worse before it gets better? Most likely. But with new technology and some AI integration and being forced to become more efficient it should get better over time. What is the old expression — you have to break a few eggs to make an omelette."

Related Content:

• IRS Shakeup: What Trump’s Commissioner Pick Could Mean for Your Taxes
• No New IRS Agents? What Trump’s Federal Hiring Freeze, Firings Means for Your Taxes
• Could ERC Delays Get Worse if Trump Downsizes the IRS?