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Mounted on the facade of the Internal Revenue Service headquarters, just above three rows of limestone arches, is a quote from Supreme Court Justice Oliver Wendell Holmes Jr.: “Taxes are what we pay for a civilized society.” But today’s IRS, weakened by the Trump administration’s budget cuts, may be ill-equipped to collect.
The Office of the Treasury Inspector General for Tax Administration, a federal agency, established a memory in January highlighting his “concerns” about the IRS’s readiness for the 2026 filing season, many of which are low from staff. The organization had more than 100,000 employees (accountants, lawyers, customer service professionals, and more) by the end of 2024; a year later, firings and acquisitions had reduced that number to about 81,000. That it lost nearly a third of its workforce will affect its ability to deal with existing problems, such as declining revenue and old technology, and to introduce new ones that will further slow it down.
The current political situation is just complicated. Previously, the agency encouraged undocumented people to file returns and promised to keep their information private. But during last year’s tax season, amid the Trump administration’s aggressive immigration push, the IRS. linked data from protected tax records to the Department of Homeland Security. The National Immigration Law Center has he suggested that if people don’t want to risk filing this year, “the IRS will bring in less revenue while also spreading fear and chaos in immigrant communities.” Meanwhile, President Trump is here who is currently being prosecuted IRS for mishandling his information (his returns were leaked to the media during his first term). He is seeking at least $10 billion in damages, all of which would come directly from American taxpayers, if he wins the case. The agency has also been without an official commissioner since August, when Trump removed former congressman Billy Long from the post. Treasury Secretary Scott Bessent was doing it double duty as acting commissioner, but the IRS announced last week that his term had expired. Since October, Social Security Administration Commissioner Frank Bisignano has been serving as the first-ever CEO of the IRS—now the agency’s top dog.
At this point in the filing season, there have been no signs that the IRS is unable to meet its critical obligations. But the warning signs are clear. One major consequence of the Trump administration’s efforts reducing staff in government agencies it’s that many senior employees—those with the most institutional knowledge and experience—have chosen to buy. Mark Mazur, who developed tax policy for the Obama and Biden administrations, told me that a walkout would prevent everything from “operations to collections to complex audits.” The IRS has been good for a long time senior labor force (by the end of 2023, 18 percent of workers were eligible for retirement, and another 37 percent are projected to be eligible in the next five years), which, Mazur said, probably added to the issue: “Thousands of people just said, Will you pay me for nine months so I don’t work and then retire? Sign me up!“
The agency’s understaffing could affect its ability to close the “tax gap,” or the difference between what the IRS owes each year and what it can harvest from taxpayers. The national tax compliance rate is high—somewhere north of 80 percent—but the gap remains important. In 2021, it was hovering around $600 billion, or about 3 percent of America’s GDP at that time. In recent years, the IRS has also had to deal with a backlog of tax returns that piled up during the coronavirus pandemic; as of December, 2 million returns from previous years were still pending processing. The wider the tax gap, and the higher the stacking, the lower the federal government’s tax revenue each year.
As a result, it turns out that federal spending on the IRS is a good way for the government to get more money. For every dollar The IRS uses to audit someone in the top 10 percent for income, getting a $12 refund, according to the National Bureau of Economic Research. The IRS is often compared to the accounts receivable department of a private sector business. “That’s one of the last areas you would cut, because you want to make sure you’re getting paid for the work you’re doing,” Mazur said. “And likewise, you’d think the government would want to be paid for the goods and services it provides.”
Those cuts have also created an unusually “hands-on-deck” situation for the IRS’s customer service team, Danny Werfel, IRS commissioner from 2023 to 2025, told me. Millions of people call the IRS with questions about their returns (there are a few options for contacting the agency) and good phone service plays a big role in helping them figure out what they owe. The account management program, which manages customer service, improved phone service once hell during the Biden administration, thanks to billions of dollars in new funding from the Inflation Reduction Act of 2022. But the division lost more than 4,000 workers amid last year’s cuts. This year, employees from different departments in the agency have had to be transferred on the phone—regardless of whether they have any knowledge of how to handle incoming calls.
Some parts of the IRS are shiny and new — the agency has recently been deploying AI to sift through submissions — but other, more critical parts of its infrastructure were coded with the decades-old COBOL programming language. The agency’s digital file database, which dates back to the early 1960s, holds Guinness World Record for the oldest software system in continuous use. In his June report to Congress, National Taxpayer Advocate Erin M. Collins, another IRS agency, noted that staffing cuts would hinder the agency’s ability to carry out its goals – technological innovation chief among them.
The IRS represents the kind of sclerotic bureaucracy that Trump claims he wants to reform. His first administration tried to rethink tax returns by putting them on forms postcard sizeand his second administration at one point sought to replace the Internal Revenue Service—and the income tax—with outside Revenue Service funded by taxation (not an implemented idea). The problem is that by taking the hatchet to the agency, the president has reduced his goal of reducing waste.
The experts I spoke to agreed that the IRS is not on the verge of being phased out anytime soon (meaning you will still need to pay your taxes this year). But in distancing itself from agency, the administration threatens to undermine the principle that Holmes describes. A well-functioning society, he reminds us, always comes at a cost.
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Rafaela Jinich contributed to this magazine.
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