With federal budget cuts looming, the IRS is planning a significant reduction in its workforce. Here’s what we know and what it could mean for taxpayers, compliance, and the future of IRS operations.
Background
In early 2025, the IRS reported over 100,000 employees. As of this writing, 11.4% of that workforce has already been reduced, with up to 50% in total reductions rumored.
Historical Comparison
1995: 114,000 employees processed 205M returns.
2017: 72,800 employees processed 245M returns.
2023: IRS processed 271M returns and collected over $4.6T.
Challenges Ahead
Outdated Tech: 33% of IRS systems are considered legacy, with some dating back 60+ years and relying on COBOL.
Cybersecurity Risks: Legacy systems make IRS data a high-value target for hackers.
Limited Online Access: Most services still require paper or phone communication.
Service Breakdown
Paper Backlogs: Millions of returns delayed.
Call Center Woes: Only 29% of calls were answered in 2023.
In-Person Help: Only 11% of appointment-seeking callers even reached someone.
Potential Impacts
Lower audit rates may reduce recovered tax dollars.
Service quality may further decline with fewer employees and more closures.
IRS modernization efforts remain underfunded and delayed.
Final Thoughts
This dramatic workforce reduction could reshape how the IRS operates—and how taxpayers interact with the agency. While fewer audits might sound good, the long-term implications on tax administration, compliance, and service quality remain to be seen.
