IRS preps for massive layoffs that could reduce audits, slow refunds

What you probably already know: The Internal Revenue Service is preparing to cut thousands of people from its ranks, according to a report by the Associated Press. The cuts, which could be as much as half the staff, would render the institution “dysfunctional,” according to a former IRS commissioner, and end any revenue collection work that was underway. About 7,000 IRS workers had already been laid off a few weeks ago. About 90,000 people currently work for the IRS.

Why? In addition to the layoffs, the Trump Administration has indicated plans to lend IRS workers to the Department of Homeland Security to aid in immigration enforcement. It is, of course, tax season, which has many wondering how the layoffs could impact their filing process and tax refunds. While the IRS has said it is not firing employees who are critical to the tax filing season, it’s difficult to imagine that eliminating half the staff wouldn’t also cut into that workforce.

What it means: The IRS collected $4.7 trillion in gross taxes and processed 271.5 million tax returns in 2023. It also issued about $659 billion tax refunds, and provided assistance to 60 million taxypayers who called or visited an IRS office. Many are concerned that, by cutting so many jobs, the agency will be unable to keep up with the pace of its audits, which generate billions for the U.S. government. Auditors at the IRS collected $31.9 billion additional taxes in 2023, which is more than the budgets of NASA, the Department of the Interior, and the Environmental Protection Agency.

What happens now? The IRS has until March 13 to develop a report on its reduction efforts and it remains unclear how quickly the layoffs will take effect. If they’re implemented quickly, experts says taxpayers would likely experience delays in getting their refunds, and it could be difficult to get help if there are technical issues that come up during filing. And that’s not just true this year. These kinds of deep cuts are likely to have impacts for years to come, including less enforcement of tax fraud and fewer audits of wealthy people and corporations.