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Tax filing season 2025, against all expectations, went pretty smoothly. Despite the fact that the IRS had been roiled by successive rounds of reductions in force, and that its leadership resembled a game of musical chairs, spring ’25 still brought “one of the most successful filing seasons in recent memory,” according to National Taxpayer Advocate Erin M. Collins.
But the relative efficiency of this year’s tax season could mask trouble on the horizon. The IRS will experience a 26% reduction in headcount this year, with around 26,000 of its more than 102,000 employees leaving or intending to do so. But many departing employees took deferred resignation agreements which don’t require them to leave until September 30—meaning that, throughout tax season, the IRS hadn’t yet felt the full impact of the job cuts.
In fact, taxpayer services employees, around 9,000 of whom are resigning, weren’t allowed to leave until June 30. Other staff who accepted the first round of deferred resignation agreements were classified “essential” and had to stay until May 15.
In years to come, spring 2025 may well be remembered as the calm before the storm.
The staff and budget cuts the IRS faces will undo the progress it was able to make with funding from the Inflation Reduction Act (IRA). And even the IRA money was largely a stopgap for an agency that’s seen its resources cut time and time again.
2025 cuts follow decades of turbulence: To understand the impact of the 2025 job cuts, it’s helpful to look back—way back, to before MTV even aired its first video.
The 2025 reduction in force will take the IRS down to around 76,000 employees, or close to 2016 staffing levels. That doesn’t sound too bad, until you consider that, in 2016, the IRS employed 11,000 fewer people than it did in 1980.
And naturally, the IRS’s job has only gotten bigger since the heyday of the Buggles. For reference, in 1980, with a staff of 87,46, the IRS collected $5.2 billion (that’s “billion” with a “b”) in revenue, compared with $5.1 trillion in 2024.
The 2025 cuts also come on the heels of a turbulent fifteen years for the agency. Throughout much of the 2010s, Congress steadily cut the IRS’s funding, lowering its budget from $14b in 2010 to $12b in 2017. A hiring freeze was in place from 2011 to 2018.
“We lost a whole generation,” former IRS Commissioner Chuck Rettig said during a speech at the AICPA’s 2025 Engage conference.
Then, Covid hit. During the pandemic, the IRS closed some offices, and initially, remote work capabilities were limited. The agency halted mail processing between March and July 2020, and tax returns and other paper correspondence piled up. In 2021, it faced a backlog of more than 35 million tax returns that needed processing. The IRS struggled well into 2022, answering just 12.5% of calls, with wait times averaging 29 minutes.
The IRS gets a Band-Aid: The IRA threw the IRS a $78.9 billion life preserver. The funding “did not plug the hole, but it definitely started to right the ship,” Elena Patel, a senior fellow at the Urban-Brookings Tax Policy center and business professor at the University of Utah, told CFO Brew. The IRS used the funds to hire around 12,000 people, bringing its staffing levels northward of 100,000 for the first time since 1997.
The changes led to improved service levels. The agency answered 9 million more calls in 2024 than it did in 2022, more than doubling the percentage of calls it answered overall. It halved the time it took to respond to individual taxpayer correspondence. And it was finally able to work through the “mountain of paper returns and correspondence that piled up during the pandemic,” Collins wrote in a report to Congress.
That said, service levels still aren’t exactly stellar. In 2024, IRS employees still answered less than a third of individual taxpayer calls on its primary line, and only 55% of practitioner calls. Practitioners spent an average of 12 minutes on hold. Staff took an average of 110 days to complete a work cycle for a piece of individual correspondence, and spent an average of 147 days—nearly five months—on business correspondence.
And more budget cuts are coming. Congress began cutting the IRA funding, which was intended to last the IRS 10 years, in 2023. It has now rescinded $41.8 billion. The IRS is now also slated to lose 20% of its appropriated funding from Congress. That, atop the IRA cuts, will slash its budget by 37%, Collins wrote in a midyear 2025 report.
Show ’em some love: Morale among the remaining IRS employees is, as you can imagine, not great. Patel said she’s heard that “it’s kind of melee inside the IRS, because every day, employees are waiting to hear if ‘today’s the day I’m going to be RIF’d.’” Rettig, in his talk, stated that “there’s a tremendous amount of anxiety and stress in the hallways of the Internal Revenue Service.”
Tax and finance professionals should brace themselves for frustration when dealing with the IRS in the months and years to come. But they might also want to show IRS employees some grace, Rettig suggested. He called upon the accounting community to support the embattled agency, and to let IRS staff know that they’re appreciated.
“That goes a long way with people who have one eye on the door and a lot of stress,” he said.