Layoffs at the IRS: Potential Impact on Tax Season and Enforcement
Tax Season Concerns
Recent reports indicate the IRS has initiated the dismissal of over 6,000 employees, with the majority targeting enforcement staff. While the agency has stated that critical positions for tax season will be exempt, concerns have been raised regarding potential disruptions to customer service and processing delays.
"I'm hearing the firings are across all major functions, including taxpayer services and IT," said Lily Batchelder, former assistant secretary for tax policy at the Treasury Department. "They are so large that I don't see how one can guarantee they won't disrupt the filing season."
Collection and Enforcement Implications
The cuts to enforcement staff, particularly those specializing in business audits, could hinder the IRS's ability to combat tax evasion. The government loses an estimated $271 billion annually due to underreporting by businesses, contributing to the tax gap.
"A smart government efficiency effort would focus on collecting those taxes, which is a way to generate revenue without a tax increase," said Marc Goldwein of the Committee for a Responsible Federal Budget. "That's a lot harder to do without IRS agents."
Additional Layoffs and Future Plans
Whether further layoffs are anticipated remains uncertain, but the Trump administration has indicated interest in deeper cuts at the tax agency. Commerce Secretary Howard Lutnick has expressed the desire to "abolish the IRS" and replace revenue with tariffs.
Concerns Regarding Data Systems
Former Biden officials have also voiced concerns about potential risks to the IRS's data systems. Reports suggest that staff from Elon Musk's Department of Government Efficiency have gained access to these systems, raising concerns about unintended consequences from even minor tweaks to code.
"If you make one narrow change in one part of the IRS's code about something that has nothing to do with filing season, because of how all of these systems are integrated, it could end up cascading through and delaying millions of refunds," said Natasha Sarin, a former tax adviser to former Treasury Secretary Janet Yellen.