CURRENT STATUS OF IRS FORCE REDUCTIONS

CURRENT STATUS OF IRS FORCE REDUCTIONS

Are IRS Functions Now Crippled?

Since President Trump began down-sizing federal agencies in earnest in March, the IRS has lost about 18,000 workers. These include both individuals taking the offer of early retirement, and the Biden-era new hires who were on employment probation. Before the shake-up began, the agency had roughly 100,000 employees.

Under the supplemental funding provided through the Inflation Reduction Act in 2023, the Biden administration grew the IRS from about 80,000 employees to just over 100,000. With the Deferred Resignation Program offered by the Trump administration, the workforce dropped back and is now under 85,000. This is in flux from day to day as employees make up their minds whether to voluntarily leave the IRS or not.

The claim we hear is that losing IRS staff will lead to reduced revenue because it will somehow inspire people to cheat on their taxes or otherwise fail to pay what they owe. In response to this, I remind people of a couple of important points. First, historically only about 2 percent of federal revenue is collected through enforcement action; that is, direct IRS “in-your-face” involvement in the form of notices, levies, liens and other collection efforts. This tells me that, overall, people do their best to comply with the law. Nobody wants trouble with the IRS.

Second, in 2023, of the $2.562 trillion that was collected in individual (not corporate) income taxes, about 67 percent was collected through wage withholding. American employers pay the lion’s share of taxes through withholding on the wages of their employees. Indeed, throughout the period from about 2010 to 2022, the IRS’s workforce was in the 80,000 to 85,000 range, and the agency always collected about two-thirds of all personal income taxes through wage withholding. Why do we think that will stop or diminish because of personnel cuts to the agency?

In the IRS’s Office of Appeals, it has been reported that over 300 staffers have taken the deferred resignation offer, and another 100 requests are pending. At the beginning of 2025, the Appeals office had about 1,777 employees, including Appeals Officers. It is projected by Appeals management that the division will have around 1,324 employees by the end of the year.

This is one area where reduced staff will negatively impact peoples’ ability to get pending tax issues resolved. Appeals handles Collection Due Process appeals, CAP appeals, appeals from unagreed examination cases, and in many instances, docketed Tax Court cases involving deficiency actions. Indeed, any disputed case ends up in front of the Office of Appeals at some point.

Appeals Office consideration is often the fastest and best way for a person to get a reasonable resolution to their case. As I’ve said from the very beginning of the debate on whether to provide $80 billion in supplemental funding to the IRS, the Appeals function should be beefed up to provide faster and more reliable case resolution to taxpayers, rather than Congress spending money on audits and collection enforcement.

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