IRS Layoffs Underway as Tax Season Kicks OffIRS Layoffs Underway as Tax Season Kicks Off

Internal Revenue Service layoffs are underway as the Trump administration carries out its plan to shrink the government. The layoffs come following an executive order to identify all probationary employees in the government for possible termination and are expected to total some 6,700 employees, mostly new hires or newly promoted, just as peak tax season gets underway.

The agency was expected to terminate more than 3,500 probationary employees in its Small Business/Self-Employed Division last week, according to Tax Notes. The affected personnel cover a variety of roles geared toward ensuring compliance for business taxpayers with less than $10 million in assets, including collections and examination positions.

This comes as a reversal to much of the hiring done by the IRS over the last year amid an influx of funding under the Inflation Reduction Act (IRA) to further the agency’s enforcement efforts for high-income and complex taxpayers following the enactment of the IRA and ramp up auditing (as well as improve taxpayer services).

What Does This Mean for Client’s Taxes?

While the IRS and the Treasury Department haven’t commented on the layoffs, agency sources report that the employees being cut aren’t those with direct involvement in the tax return filing process. It’s unclear what, if any, delays might be encountered by taxpayers. Some potential delays include longer than usual customer service wait times and longer audit processes.

Related:Let It Be …Taxed

Harvey I. Bezozi, a tax expert based in Boca Raton, Fla., tells us that since the pandemic, things were beginning to look up for the agency “as the IRS worked diligently on its paperwork backlog and made a concerted effort to make phone and written communications more user-friendly.”

Now, amid the layoffs, Bezozi said there exist advantages and disadvantages for both taxpayers and their representatives: the positives are likely fewer audits, lien filings, wage garnishments and asset seizures, and more balance due to collection statute of limitation expirations; the negatives on the other hand include potentially longer phone wait times and returned phone message times and prolonged time to reach settlements on appeals cases and offers in compromise cases.