On March 13, 2025 CNN reported that the Trump administration and DOGE proposed cutting IRS staffing by nearly 20% by May 15th. Internal White House documents obtained by the Washington Post suggest the agency may cut its staff by 1 in 3.
The agency has been in a state of uncertain crisis since it fell into Musk’s crosshairs. But even beyond the extremely worrisome DOGE threats, the IRS has suffered from a decades long underfunding and understaffing crisis. The Inflation Reduction Act included funding provisions to alleviate the agency’s longstanding issues, but Democratic capitulation to GOP budget-cutting paused $20 billion of the originally stipulated $80 billion provision. In 2024, the agency still warned that “Human capital remains a serious, underlying issue with wide-ranging implications for both the IRS and taxpayers.”
The ongoing failure to properly tax the ultra-wealthy exacerbates already troubling levels of inequality, while also limiting the federal government’s access to potential revenue streams. According to ProPublica in 2018, “Business owners don’t pay $125 billion in taxes each year that they owe, according to IRS estimates. That’s enough to finance the departments of State, Energy and Homeland Security, with NASA tossed in for good measure. Unlike wage earners who have their income separately reported to the IRS, business owners are often on the honor system.”
Here are the responsibilities the agency has needed more staffing to properly fulfill:
- Collecting Unpaid Taxes: Every year, there is a “tax gap” that the IRS seeks to fill. The tax gap is the difference between the total taxes owed to the government and the amount actually paid on time. A 2021 Treasury report estimated that there is a $600 billion tax gap every year, likely only made worse by the huge decrease in enforcement staffers since 2010. (and nominally higher due to inflation as well)
- Auditing Rich People and Corporations: In 2022, the auditor workforce at the IRS “reached its lowest level since World War II.” The agency lost 17,000 workers over the course of the 2010s. Predictably, declining staffing levels led to a general decrease in audits: “Since 2010, the IRS’s overall audit rate has dropped 58 percent, including 54 percent for the largest corporations and 71 percent for those making more than $1 million a year.” Audits that were still conducted were less intensive and rushed. With fewer trained specialists capable of analyzing complex tax returns, IRS understaffing means large corporations and wealthy individuals have a much easier time evading taxes.
- Cracking Down On Offshore Tax Havens: The ultra-wealthy and corporations dodge taxes by hiding money in offshore bank accounts, such as in Cyprus or the Grenadines. A 2023 study from the National Bureau of Economic Research (NBER) estimated that “just below $2 trillion” of financial assets were being held in tax havens. In 2010, President Obama signed the Foreign Account Tax Compliance Act into law, which aimed to reduce the amount of offshore tax-dodging. However, offshore tax avoidance remains a pervasive issue. An August 2024 Treasury report found that the IRS was still facing issues mitigating the problem, partially caused by their difficulty recruiting and retaining a highly skilled workforce.
- Conducting Criminal Investigations: In a 2018 report ProPublica found that budget cuts had undermined the investigative capacity of the agency. The agency’s criminal investigation division lost about one fifth of its agents since 2010. According to former chief of criminal investigations at the IRS Don Fort, the agency had closed four of its 25 field offices in 2018. Additionally, “in New York state, home of the country’s financial industry, the revenue service is down to 161 agents, about a hundred fewer than it had 15 years ago.” Criminal investigations are crucial to the IRS’ ability to deter tax evasion and therefore to effectively collect public funding.
- Making It Easier For Normal People To File Taxes: In 2022, Government Executive reported on severe understaffing at the agency undermining its ability to help callers file their taxes. The agency answered only 7% of customer service calls during the pandemic. Additionally, “During the first half of 2021, the IRS had one employee for every 16,000 calls that came in.” Providing customer service is crucial for helping Americans navigate the tax system efficiently and access the refunds and tax credits they are entitled to.
- Avoiding Backlogs: The IRS has repeatedly suffered from backlogs in processing tax returns and other tax account work as a result of understaffing. A Treasury Inspector General report from 2022 testified that “ongoing substantial hiring shortfalls of employees needed to fill mission-critical Tax Processing Center positions continued to hamper the IRS’s efforts to address these backlog inventories.” Backlogs remained a persistent issue by October 2023, when the IRS reported a backlog of 1.9 million tax return documents. They also reached a backlog of 4.3 million taxpayer correspondence cases, with 70% of these cases “exceeding normal processing times as of late October.”
- Helping The Victims Of Identity Theft: The IRS has an identity theft victim assistance program. If the program identifies a tax return filed with a stolen SSN, the agency sends a letter to the person who has likely had their identity stolen. The agency also cannot process the tax return or issue a refund until it receives and verifies a response. Amidst IRS understaffing issues in FY 2023, “nearly half a million taxpayers with cases pending in the IRS’s Identity Theft Victims Assistance (IDTVA) unit were waiting an average of almost 19 months for the agency to resolve their identity theft problems.”
We are analyzing the state of understaffing across the executive branch (a trend kept up by both Democratic and Republican administrations) and assessing what Trump’s cuts would mean for everyday Americans. Read the rest of the posts in our Federal Understaffing Spotlight.