When James Creech, a California-based tax attorney, contacted the Internal Revenue Service earlier this year to resolve a routine property issue to finalize the sale of a family’s home, he was met with a weary sigh on the other end of the line.
“‘Look, it’s just me,’” Creech recalled the IRS agent saying. “‘I’m responsible for four states and I’m the only one left in my unit.’”
That IRS agent’s predicament was the direct result of the agency’s rapid and haphazard downsizing. The IRS shed over 28,000 employees between January 2025 and March 2026 through reductions in force and voluntary separations, shrinking its total workforce by more than 28%.
Trump administration officials have publicly championed the headcount reductions as a long-overdue effort to streamline government operations. However, a deeper look into internal agency operations reveals an operational paradox: rather than merely cutting bureaucratic waste, the rapid depletion of specialized personnel has fundamentally altered how tax law is enforced, producing a dramatic shift that hurts everyday Americans and high-earning entities alike.
The Human Collateral of the Workforce Reduction
The institutional shift began with the administration’s workforce reduction initiative that was spearheaded by the Department of Government Efficiency or DOGE and began in April 2025 with Elon Musk’s now-infamous “fork in the road” email to federal employees. This voluntary retirement offer—which provided extended paid leave through September 2025—combined with accelerated probationary terminations and further reductions in force, thinned the agency’s ranks from both ends.
“What these mass retirements, administrative leave and getting rid of probationary employees cause is so disruptive,” Nina Olson, executive director of the Center for Taxpayer Rights, said. “You don’t have anybody to step into roles when people are moving out. You are losing knowledge that you need.”
“We can have less people and better results,” said Frank Bisignano, the agency’s head, in April 2026 congressional testimony, pointing to smooth processing of electronically filed tax returns and rapid issuance of refunds as proof of a lean, modernized operation.
While budget cuts are designed to reduce federal outlays, experts note that halting active technology upgrades generates capital losses across canceled technology initiatives.
Agency employees also see the reality differently. The Public Service Viewpoint Survey, an independent survey of federal employees conducted by the Partnership for Public Service in late 2025, found that nearly half of IRS employee respondents felt the agency had become worse at delivering quality services and fulfilling the public’s needs. Less than 20% reported being satisfied with the agency and less than 8% reported having trust in the agency’s political leadership.
“Talking to people inside the agency, they just say it’s awful right now,” said Olson of the Center for Taxpayer Rights. “It leaves behind basically the shell-shock victims that are left behind and wondering when the shoe is going to drop for them.”
The “Barbell Effect” of Enforcement
The fallout from this operational collapse does not strike evenly. Instead, it has produced what Creech describes as a “barbell effect”—a structural dynamic that leaves routine automated returns largely unaffected while severe operational disruptions crush the opposing ends of the economic spectrum.
On one end of the barbell sit high-value corporations, multi-tiered pass-through entities and offshore funds. As the IRS bled its senior auditors trained to untangle complex financial architecture, top-level oversight plummeted. Oversight data from the Treasury Inspector General for Tax Administration shows that overall agency audits plummeted by 35%, dropping from $10 billion in fiscal year 2024 to $6.5 billion in fiscal year 2025.
The contraction of specialized personnel has also altered how the agency handles consumer fraud cases. In late 2023, the IRS identity theft case inventory hovered at around 484,000 open files, with wait times averaging 14 months. Following recent agency downsizings, the backlog has expanded past 500,000 open cases with average resolution times stretching to an unprecedented 20 months.
On the opposite end sit low-income workers and small business owners. When working families navigating complicated childcare credits trigger an automated fraud flag, there is no longer a robust human apparatus to resolve it. Taxpayer Assistance Centers offer reduced face-to-face operations while callers are routinely routed to reassigned phone personnel with minimal training in tax law.
“The constant beef is that sometimes you can get through on the phone but you get someone who knows nothing,” Olson said. “Or they’re giving you incorrect information about what the law is.”
For low-income households, a withheld refund can be an immediate crisis. “That refund is probably the refund that you’ve been waiting for to do a car repair or put some money in a savings account,” Creech said. “If that refund gets slowed down… the more complex your return and your life are, the more the burden gets shifted back to you. For people with already complicated lives, that’s when they just start opting out.”
The Loss of Civic Trust
Beyond the immediate impact on everyday taxpayers, the downsizing has disrupted the foundational data models used to catch tax evasion.
In an email statement regarding personnel drops, Richard Prisinzano, director of Policy Analysis at The Budget Lab at Yale University, detailed how an under-resourced agency actively undermines its own auditing selection process. Prisinzano explained that the “Tax Gap” report—a comprehensive report produced regularly under past administrations that tracks noncompliance by non-filing, underreporting, and underpayment across specific income sources—is critical for directing active enforcement.
“The report also informs the statistical model IRS uses to pick returns for random audits,” Prisinzano said. “A delay could keep the IRS a step behind in properly directing audits and picking the ‘wrong’ returns to audit.”
According to analytical data compiled by The Budget Lab, a halving of agency capacity could reduce revenues by at least $350 billion over a decade. However, if the lack of human oversight triggers broader noncompliance among taxpayers, Prisinzano’s model projects that lost federal revenues could skyrocket up to $2.4 trillion within a decade, further widening an already historic budget deficit.
“Our system really works because the IRS has the ability to audit,” Creech said. “It’s just enough of a threat to keep the vast majority of people honest. Losing those people reduces the chance of being audited.”
Because the structural enforcement framework relies on specific and immediate oversight deterrence, a prolonged breakdown in operational capacity alters long-term taxpayer behavior.
“That erosion of trust shows up in lots of little ways,” Olson said. “It just erodes people’s willingness to comply because they think they’ve been treated badly. It will take a generation, if all goes well, to build back that trust.”
Author: Edith Mwangi, journalism and communications fellow at the Partnership for Public Service