IRS Drafting Plans to Cut Down Workforce by Half

Reports indicate that the IRS is drafting plans to significantly reduce its workforce, potentially cutting up to half of its approximately 90,000 employees. These plans involve a combination of layoffs, attrition, and incentivized buyouts, according to sources familiar with the situation. A workforce reduction of the magnitude proposed in the IRS draft plans—potentially cutting up to half of its roughly 90,000 employees—would have wide-ranging impacts on the agency’s operations, the broader economy, and taxpayers.

This comes as part of broader efforts under the President Donald Trump administration to shrink the federal workforce, with influence from Elon Musk’s Department of Government Efficiency (DOGE). Already, around 7,000 probationary employees were laid off in February 2025, and further reductions are being considered, though it remains unclear if the White House will approve the full scope of the IRS’s proposal or over what timeline it would occur.

The initiative aligns with a push to streamline government operations, but critics, including former IRS Commissioner John Koskinen, warn that slashing tens of thousands of jobs could render the agency “dysfunctional.” Additional plans include redirecting some IRS staff to assist the Department of Homeland Security with immigration enforcement. Official confirmation from the White House, Treasury Department, or IRS is still pending, leaving the final outcome uncertain for now.

The IRS is responsible for collecting over $4 trillion annually in tax revenue, which funds most federal government operations. A 50% staff cut could severely limit its ability to audit tax returns, pursue tax evasion, and enforce compliance. For context, the IRS has historically struggled with understaffing—Koskinen’s warning of a “dysfunctional” agency suggests that losing tens of thousands of workers could lead to unprocessed returns, delayed refunds, and a backlog of cases. Studies show that each dollar spent on IRS enforcement yields $5–$10 in recovered revenue, so a diminished workforce might paradoxically increase the federal deficit by letting tax cheats slip through the cracks.

The IRS already faces criticism for long wait times and unanswered calls (e.g., only 29% of calls were answered in 2022 before recent funding boosts). Cutting staff would likely worsen this, leaving taxpayers—especially individuals and small businesses—stranded on filing issues, refund delays, or complex tax questions. Redirecting some staff to immigration enforcement, as proposed, would further strain resources for core tax functions.

The IRS has been working to modernize its outdated IT systems and shift to digital services. A reduced workforce, particularly if it includes skilled IT personnel, could slow these efforts, keeping the agency reliant on paper-based processes and antiquated infrastructure (some systems date back to the 1960s).

Economic and Social Impact

Laying off or buying out up to 45,000 workers would directly affect those employees and their families, particularly in areas like Ogden, Utah, or Kansas City, Missouri, where IRS facilities are major employers. This could depress local economies, reduce consumer spending, and increase demand for unemployment benefits. Incentivized buyouts might soften the blow for some, but mass layoffs (like the 7,000 probationary workers cut in February 2025) could still flood job markets with displaced workers.

A weaker IRS disproportionately benefits high-income earners and corporations, who are more likely to exploit tax loopholes or underreport income. Audits of millionaires and large firms—already down in recent years due to prior staffing shortages—could drop further, shifting the tax burden onto wage earners and small businesses who lack the resources to evade scrutiny. If IRS staff are reassigned to assist Homeland Security, as suggested, this could bolster immigration enforcement capacity (e.g., deportations tied to Trump’s agenda). However, it’s unclear how tax specialists would adapt to such roles, potentially leading to inefficiencies or misallocated skills.

Proponents, including those tied to Musk’s DOGE initiative, argue that a leaner IRS reduces bureaucratic waste and overreach (e.g., fewer “intrusive” audits). They might point to the agency’s $80 billion funding boost from the 2022 Inflation Reduction Act—partly reversed under Trump—as evidence of prior over-expansion. Opponents, including Democrats and tax experts, contend that gutting the IRS undermines its ability to serve the public and fund government programs. Public frustration could grow if services collapse, potentially fueling political pressure to reverse course or find alternative revenue sources (e.g., new taxes).

The exact impact hinges on execution: Will cuts target enforcement, customer service, or administrative roles? Will attrition and buyouts suffice, or will forced layoffs dominate? Without White House approval, the plan’s scope and timeline remain speculative. Historically, IRS staffing dropped from 117,000 in 1990 to under 80,000 by 2019, with noticeable declines in audit rates and revenue—halving it again could amplify those trends exponentially.  In short, a 50% reduction could streamline the agency in theory but risks crippling its core functions, widening economic gaps, and sparking public discontent—all while testing the limits of “doing more with less.”