IRS Budget Cuts Raise Concerns Amid New Tax Laws

The IRS is gearing up for significant budget and staffing cuts next year, coinciding with Congressional Republicans’ plans to enact a budget adjustment package that will likely increase the workload for tax agencies.

A former leader of the IRS has voiced worries that these cuts will severely limit the agency’s ability to provide satisfactory customer service during the upcoming application season, particularly as President Trump’s proposed “big beautiful bill” makes its way through Congress.

The Tax and Expense Reduction Bill is expected to cause a scramble among IT systems and staff as they prepare for substantial changes in tax law ahead of the filing season.

The Trump administration’s 2026 budget request aims to shrink the IRS workforce from approximately 97,000 employees to around 78,000—a reduction of nearly 20%.

As for the budget itself, it ranges between $22 billion and about $14 billion, which amounts to a 37% reduction.

This level of staffing cut is anticipated to lead to the IRS collecting around $159 billion in revenue over the next decade.

The 2026 budget request outlines a nearly 60% cut in IRS technology and operational support staff, along with a near 40% reduction in related spending.

In these budget requests, technology and operations make up the “single biggest elements” of the overall request and highlight the crucial role of funding for IRS technology.

Despite looming cuts, the Treasury department anticipates that the IRS will “substantially complete” many of its key IT modernization initiatives within the next two years.

These modernization efforts aim to boost automation and bring together a patchwork of IT systems, helping employees produce a more comprehensive view of relevant tax information and enhance taxpayer interactions.

Interestingly, even with budget cuts, the IRS is planning to hire over 11,000 call center representatives to maintain existing levels of telephone support for taxpayers. The agency is requesting $852 million to fund this hiring and implement automation tools to assist customers further.

Without this funding, the IRS has warned that only 16% of calls will be answered during the next tax season, and that will drop to just 11% in 2026.

The budget request states, “Funding this investment below the required level will significantly reduce calls. It undermines taxpayer services.”

Yet, reaching hiring goals may prove elusive. Historically, the agency has struggled to recruit so many call center representatives, even when faced with significant funding opportunities from the Inflation Reduction Act.

Recently, former IRS commissioner Danny Warfel mentioned that funding from the Inflation Reduction Act enabled the IRS to tackle “immediate performance issues” back in 2022, leading to record telephone service levels.

In the 2026 budget request, it was noted that call center reps handled roughly 9 million calls during this year’s application season, managing to answer about 87% of them while callers waited an average of three minutes on hold.

Warfel commented, “We’ve built a resilient operation that will allow us to make the filing season a success this year. However, I don’t think we can absorb staff cuts long-term.”

He also stated that the IRS has implemented taxpayer-focused updates to its website more in the last two years than in the previous two decades combined.

“It’s about funding. It’s not rocket science; it’s just about having resources and bringing in some talent to work with existing teams for success,” he added.

In a related note, the IRS put 50 senior IT leaders on paid administrative leave in March, and Rajiv Uppal, the agency’s Chief Information Officer, resigned at the end of April.

Chuck Rettig, who was IRS commissioner during the first Trump administration, remarked that new hires can’t compensate for the institutional IT knowledge that has been lost over time.

“In the tech field, the IRS is extremely short-staffed. We can’t count on today’s entry-level employees or those with less than five years of experience,” Rettig said.

Treasury Secretary Scott Bescent mentioned in a recent House Budget Committee meeting that the “AI boom” could help the IRS manage workloads amid the significant cuts.

However, John Koskinen, a former IRS commissioner under Obama, cautioned that AI has limitations in replacing human employees.

“The IRS has explored automation, but even the most advanced AI can’t handle all the inquiries that need a personal touch, whether through a call, letter, investigation, or audit,” Koskinen explained.

Larry Gibbs, who also served as IRS commissioner during the Reagan era, stated that if Congress approves major tax changes in the budget adjustment bill, the IRS will face an even heavier workload next filing season.

“Significant changes to tax laws from this ‘big beautiful bill’ will require training staff over the phone. If the bill passes, we can expect demand to surge come filing time,” he noted.

By June, IRS employees will already be laying the groundwork for the next tax season. Koskinen added that workloads are bound to increase if tax laws change.

“When new tax laws come into play, the IRS must prepare and implement them on the fly,” he concluded.

House Ways and Means Committee Ranking Member Richard Neal (D-Mass.) expressed concerns in a statement that the Trump administration’s budget request “will undermine customer service and enforcement, allowing the wealthy to evade their tax responsibilities and shifting the burden onto everyone else.”