IRS faces uncertainty as Treasury delays workforce reduction plan

In the United States, the Internal Revenue Service (IRS) is currently navigating through challenging staffing issues amidst ongoing discussions about workforce reductions. As of March 18, 2025, acting Commissioner Melanie Krause informed employees that the Treasury Department had not yet finalized and delivered the reduction-in-force (RIF) plan to the agency. This uncertainty has led to confusion and apprehension among IRS employees and external practitioners alike, particularly affecting tax resolution professionals who have reported being left without necessary contacts due to employee rollbacks. There is widespread concern regarding how these staff cuts could impact the upcoming tax filing season. Reports suggest that while the IRS is attempting to preserve essential personnel by exempting some from recent probationary cuts and requiring certain former employees to remain in their roles, the overall effectiveness of this strategy is still in question. Former IRS officials have raised alarms, citing potential negative outcomes in the processing and handling of tax resolutions once the filing season concludes, as affected taxpayers will have to manage corrections or amendments to their returns. Additionally, there has been a halt in the IRS's modernization efforts, as unnamed officials revealed that a review of current technology strategies is taking place to enhance cost-effectiveness and integrate newer technologies. This pause has further compounded the challenges as the IRS seeks to modernize its operations while grappling with staff shortages. Leadership within the IRS has also shifted, with Melanie Krause occupying dual roles as the acting commissioner and deputy commissioner following the exit of former officials. Concerns regarding governance have been voiced by figures like John Koskinen, who previously served as IRS Commissioner. Overall, the continuing staffing adjustments, leadership transitions, and other challenges underline the significant pressure the IRS is under as it prepares for an important tax season, which is expected to reveal deeper issues related to its operational capacity and effectiveness.