The IRS is set to lay off thousands of employees currently on probationary status, as part of ongoing cost-reduction measures initiated by the Trump administration. The full implications of these layoffs for the tax filing season, which began on January 27, 2025, remain uncertain. This decision follows previous budget and personnel reductions at the IRS.
Projected Cuts to the IRS Workforce
According to an internal email obtained by Forbes, layoffs are anticipated to occur this week, particularly affecting at least 3,500 employees in the Small Business/Self-Employed (SB/SE) division. This division, led by Lia Colbert, serves over 57 million small business owners and self-employed individuals with assets under $10 million. Positions at risk of elimination include those in auditing, collections, operational support, and fraud enforcement.
The layoffs primarily target probationary employees, who are typically recent hires but can also include long-serving employees who have recently transitioned or been promoted into new roles. Reports suggest that cuts may extend beyond the SB/SE division, with ABC News estimating the potential total layoffs at around 15,000. Concerns about job security have been voiced by current employees, with indications that layoffs are planned in IRS offices in Atlanta and Kansas City. Although not independently verified by Forbes, local reports suggest that Kansas City could see layoffs of around 1,000 employees this week.
Previous Reductions and Resignation Offers
Earlier this year, the IRS had called back workers who had opted for early retirement. On January 27, 2025, coinciding with the start of the individual tax filing season, the Office of Personnel Management sent an email to over two million federal employees, including IRS workers, offering them a Deferred Resignation Program (DRP) that allowed them to resign but remain on payroll until September 30, 2025. The IRS subsequently announced that employees in critical positions for the filing season would be exempt from this program until May 15, 2025, though the criteria for these positions remains unspecified.
An executive order from Trump has enforced a hiring freeze across most federal agencies; however, the IRS is exempt from this pause. The order mandates that a workforce reduction plan be submitted within 90 days, meaning that the IRS will continue its hiring freeze until deemed appropriate to lift it by the Secretary of the Treasury.
Trump has made remarks about the possibility of terminating IRS employees or reallocating them to other duties, including immigration-related functions. He referenced misinformation about IRS funding suggesting a significant expansion of the agency’s workforce, which has sparked public concern regarding the IRS’s role.
Implications for the IRS and Federal Workforce
The IRS has been under scrutiny lately while it was previously expanding its workforce through funding from the Inflation Reduction Act, which aimed to bring on 87,000 new employees over ten years. Attrition rates mean the IRS’s total workforce is nearing 90,000, which, while high compared to recent years, is still below levels from the 1990s. Recent budget reductions have clawed back nearly half, $40 billion, of the Inflation Reduction Act’s appropriated funds.
Both the IRS and the Treasury Department have been silent on recent layoffs, which has become the norm in media responses. It appears that communications from the agency are now subject to high-level review, leading to slow or absent responses.
Concerns Over IRS Data Access
In another development, the Department of Government Efficiency (DOGE), led by Elon Musk, has expressed interest in accessing IRS data, which encompasses sensitive taxpayer information. This week, Senators Ron Wyden (D-Oregon) and Elizabeth Warren (D-Mass.) sent a letter to the acting IRS Commissioner demanding transparency regarding any access granted to DOGE personnel. They voiced concerns that interference with IRS systems during the busy tax season could lead to disruptions affecting tax refund issuance, with potential dire financial consequences for many Americans.
