15,000 IRS Layoffs Could Affect Your Taxes
January 27th officially kicked off tax season with the IRS accepting and processing returns two days earlier than it did in 2024. There are plenty of reasons to file your taxes sooner than later, but there's a new concern that we may not have encountered before.
As many as 15,000 IRS employees could be laid off in the coming weeks, raising concerns about potential delays in processing tax returns and issuing refunds. This comes at a critical time when millions of Americans are preparing to file their taxes, and any disruption to IRS operations could have significant consequences.
The Details of the Layoffs
The potential layoffs would affect newly hired workers primarily in lower-level positions. These positions include taxpayer response roles, phone center staff, and junior audit positions. These employees are typically in probationary status and lack the civil service protections afforded to more tenured IRS staff.
With the IRS currently employs around 90,000 full-time workers, the potential loss of 15,000 employees would represent a 17% reduction in the agency's workforce. Such a significant cutback during the busiest time of year for the IRS is raising alarm bells among tax professionals and taxpayers.
DOGE: The Cause Behind the Cuts
The layoffs are reportedly driven by directives from the Department of Government Efficiency (DOGE), a new government agency established by President Donald Trump. Tasked with identifying and eliminating perceived inefficiencies within the government, DOGE has enlisted Tesla and SpaceX CEO Elon Musk to spearhead these efforts.
Tthe Trump administration's broader goal is to streamline government operations and reduce federal spending. However, the timing of these potential layoffs during peak tax season has drawn criticism and sparked debate about the potential impact on taxpayers.
Impact on Taxpayers and Refunds
The potential IRS layoffs could have several significant implications for taxpayers.
With fewer staff available to process tax returns, the IRS may struggle to keep up with the volume of filings during peak season. This could lead to delays in processing returns and issuing refunds, potentially causing financial hardship for taxpayers who rely on those refunds. According to Credit Karma, 37% of filers rely on their refunds to make ends meet, while 47% plan to pay down debt with their refund.
Taxpayers who need assistance with their tax returns or have questions about their refunds may face longer wait times and difficulty reaching IRS representatives due to reduced staffing in taxpayer response roles and phone centers.
While the layoffs primarily target lower-level positions, they could also affect junior audit positions, potentially leading to increased scrutiny of tax returns as the IRS attempts to maximize its limited audit resources.
The increased strain on IRS resources could also place a greater burden on tax professionals, such as CPAs and accountants, who may need to spend more time resolving client issues.
Concerns Over DOGE's Operations
In addition to the potential impact on taxpayers, the creation and operations of DOGE have raised some concerns.
DOGE is making big decisions quickly, but the people doing the reviews might not have enough experience with important government systems.
Concerns have also been raised about DOGE's access to government servers, which may contain personally identifying information (PII) such as Social Security Numbers, bank account information, and employment, health, and personal data from various government departments.
Data privacy experts have expressed concerns about the security and privacy of this sensitive information in the hands of an unofficial agency with limited oversight.
Reactions and Potential Opposition
The news of these potential IRS layoffs has been met with a mix of concern and opposition from various quarters. Tax professional organizations have expressed alarm about the potential impact on taxpayers and the tax system, urging the administration to reconsider the cuts.
Some members of Congress have also voiced concerns, arguing that the layoffs could undermine the IRS's ability to effectively administer the tax laws and provide essential services to taxpayers. They may introduce legislation to prevent or delay the layoffs, or to provide additional funding to the IRS to offset the impact of the cuts.
What Taxpayers Can Do
In light of the potential IRS layoffs and the resulting uncertainty surrounding tax season, taxpayers can take several steps to protect themselves:
File Early: Filing your tax return as early as possible in the tax season can help you avoid potential delays in processing your return and receiving your refund.
File Electronically: E-filing is generally faster and more accurate than filing a paper return. It also reduces the risk of errors that could trigger delays in processing.
Choose Direct Deposit: Opting for direct deposit for your refund ensures that you receive your money as quickly as possible.
Gather All Necessary Documents: Before filing your return, make sure you have all necessary documents, such as W-2s, 1099s, and other income statements.
Double-Check Your Return: Carefully review your tax return for any errors or omissions before submitting it. Mistakes can delay processing and potentially trigger an audit.
Keep Records Organized: Maintain organized records of your income, expenses, and tax-related documents. This will make it easier to prepare your tax return and respond to any inquiries from the IRS.
Seek Professional Assistance: If you have complex tax situations or are unsure about how to prepare your return, consider seeking assistance from a qualified tax professional.
IRS Funding and Staffing
The potential IRS layoffs come amid a long-standing debate over the agency's funding and staffing levels. Over the past decade, the IRS has faced budget cuts and staffing reductions, which have been blamed for declining taxpayer service levels and difficulties in enforcing the tax laws.
Some argue that these cuts have been counterproductive, leading to increased tax evasion and reduced revenue collection. They advocate for increased IRS funding and staffing to enable the agency to effectively administer the tax system and provide better service to taxpayers.
Others argue that the IRS is bloated and inefficient, and that streamlining operations and reducing staffing levels are necessary to improve efficiency and reduce government spending. They support the Trump administration's efforts to reform the IRS and eliminate perceived inefficiencies.
An Uncertain Tax Season
The potential IRS layoffs during peak tax season have created a sense of uncertainty and concern among taxpayers and tax professionals. While the full impact of the cuts remains to be seen, the possibility of refund delays and reduced taxpayer assistance has raised alarm bells.
As taxpayers navigate this uncertain tax season, it's important to take steps to protect themselves by filing early, filing electronically, choosing direct deposit, and ensuring that their tax returns are accurate and complete.
The coming weeks will be critical in determining the fate of the IRS layoffs and the impact on the 2025 tax season.