With seven thousand workers fired, and a bigger round of firing ahead, it is not clear what the Internal Revenue Service (IRS) will be prioritizing in the future.
In September of last year, we reported on some of the accomplishments of the IRS that had been realized through increased funding provided by the Inflation Reduction Act. The IRS, which had functioned on a shoestring budget for more than a decade, was able to rebalance its workforce, update technology, and regain expertise to conduct complicated business tax audits, which had long exceeded its grasp.
Last year, the IRS pursued high-income taxpayers with outstanding tax balances and a habit of failing to file income tax returns. The funding paid off—literally. The IRS was able to collect more than $1 billion in overdue taxes.
A Wave of Layoffs
Fast forward just a few months, with tax season well underway. According to The Washington Post, approximately seven thousand employees were laid off in late February, which included 5,000 from revenue collections and enforcement. With renewed funding under the Inflation Reduction Act, the agency had been able to hire approximately 10,000 new workers. As with agencies across the federal government, federal employees working through their probationary period after being hired or promoted lacked the job protections of more senior colleagues. At the IRS, as a result, the first round of mass firings eliminated most of the gain—and importantly—the employees that revitalized the mandate of the IRS to collect on tax debt owed.
So how does that layoff affect this tax season? According to experts—like former IRS Commissioner Charles Rettig—the firings may not have a huge effect on the processing of returns and timely distribution of refunds this season.
The future? Ask Again Later
Beyond that, the picture gets more hazy. The Associated Press (AP) and The New York Times report plans are underway to fire approximately 50 percent of the remaining workforce. It is believed the next, larger round of firings will not occur until after the tax season.
Love it or hate it, the IRS has an important role in keeping the lights on and government agencies stable in the United States. One former IRS commissioner, John Koskinen, noted a mass firing of half of the remaining IRS workforce would more than leave the IRS “dysfunctional.”
For business and high-asset individuals and families, the heat is off. From the look of it, the years ahead for the IRS may see dramatically reduced criminal tax investigations, IRS tax collection efforts, and prosecutorial vigor. Good, bad, indifferent? We will see.
Concerned About an Audit Anyway?
If you have a compliance question or a question about a possible audit, reach out to us at 440-250-9709 or schedule a consultation. The attorneys at Robert J. Fedor, Esq., L.L.C. serve both domestic and international clients, with offices in Cleveland and Chicago. When you need experienced advice, speak with our law firm.
For practical tips on steering clear of tax audits, download our eBook, Five Ways to Avoid a Tax Audit. This resource provides valuable strategies and insights from our seasoned tax attorneys to help you manage your tax matters more effectively.
