The Internal Revenue Service has shed about a quarter of its workforce in 2025 and is now trying to bring some of those people back. As reported on August 25, 2025 by the Tax Adviser, the agency has identified critical vacancies it needs to fill and is offering certain departing employees the chance to rescind their resignation agreements. For high earners, business owners and estates whose returns require human review, the shrinking agency changes the texture of every interaction with the IRS.

What changed

The reductions came through several channels. As of May, 25,386 employees had left through deferred resignation and other incentive programs. Another 7,315 probationary employees were terminated in February and March. Of those terminated probationary workers, 3,716 had no performance rating on file, and 3,556 of the 3,599 who did were rated fully successful or better.

A further 294 employees received reduction-in-force notices but remain on the payroll because of a court injunction, and 3,023 probationary employees continue working unless they choose to leave. Employees who had accepted resignation offers were given five days to respond to the opportunity to rescind, which the IRS described as available by mutual agreement for roles tied to critical vacancies.

The staffing drop coincides with leadership turmoil. Earlier in August, Commissioner Billy Long was removed less than two months after his confirmation, leaving Treasury Secretary Scott Bessent as acting head of an agency that has cycled through multiple leaders this year.

Who is affected

Most wage earners with simple returns interact with the IRS through automated systems and may notice little. The effects concentrate where people are needed:

  • Examinations. Audits of high-income individuals, partnerships and estate tax returns rely on experienced revenue agents and attorneys, who take years to train.
  • Correspondence. Responses to notices, amended returns, penalty abatement requests and identity verification all run through staff queues.
  • Business filers. Owners claiming new-law benefits such as retroactive research expensing may file superseding or amended returns that require manual processing.
  • Estates. Closing letters and transfer certificates that executors need to settle estates depend on examiners' time.

The after-tax math

Fewer auditors does not lower anyone's tax bill; the law is unchanged, and so are the time limits the IRS has to assess additional tax. What changes is the timeline and the cost of uncertainty.

Example: a business owner files an amended return claiming a $150,000 refund. A backlog that turns a nine-month wait into 18 months delays the cash by nine months. The IRS pays interest on overpayments, but that interest is taxable income. For an estate waiting on a closing letter before distributing $5 million to heirs, the delay can mean holding assets, and paying professional fees, far longer than planned.

On the other side, a thinner audit pipeline can stretch open examinations. Interest on any eventual deficiency continues to accrue while a case sits, so a dispute that takes twice as long can cost meaningfully more even if the underlying adjustment is the same.

Moves to discuss with your advisor

  • Documentation up front. Returns with complex positions, such as large charitable gifts of property, cost-segregation studies or partnership losses, tend to move faster when appraisals and support are ready before any inquiry.
  • Disclosure choices. Households taking positions under new provisions without IRS guidance may want to weigh the use of disclosure forms that can limit penalty exposure.
  • Digital tools. Practitioner and taxpayer online accounts often surface notices and transcripts sooner than mail.
  • Cash planning. Families counting on a refund or an estate closing letter often build in extra time.

What to watch

The next test is the 2026 filing season, the first to include the July tax law's new deductions and forms. Watch for hiring authorizations, reports from the Treasury Inspector General for Tax Administration on service levels, and any shift in how the IRS allocates its remaining examiners between high-income individuals, partnerships and large corporations.

Sources

  1. First reported IRS seeks to fill 'critical vacancies' as workforce declines 25% — The Tax Adviser (AICPA)
  2. Billy Long out as IRS commissioner after less than two months — The Tax Adviser (AICPA)

After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.