IRS faces crisis as a third of tax auditors laid off amid efficiency cuts

In March 2025, the IRS's workforce saw a significant decline, dropping by more than 11,000 employees or 11%. This reduction included a notable loss of 3,623 revenue agents, which constitutes 31% of their auditing staff. These cuts are part of broader measures taken by Elon Musk's Department of Government Efficiency, aimed at reducing government expenditure. The drop was largely due to changes such as probationary terminations and the agency's deferred resignation program aimed at streamlining the workforce. The result has raised concerns among lawmakers and IRS officials about the agency's ability to effectively enforce tax compliance. Despite the workforce reductions, U.S. Treasury Secretary Scott Bessent emphasized that maintaining revenue collections would continue to be a priority for the IRS. He argued that this could be achieved through enhanced technological initiatives rather than relying solely on agents. In a recent testimony, Bessent assured that extensive budget cuts, amounting to nearly $2.5 billion for IRS operations, would not hamper the agency's ability to collect taxes, stating that the agency would utilize smarter IT and artificial intelligence to meet its revenue goals. This drastic change within the IRS has sparked concern among various lawmakers, particularly more than 130 House Democrats who have highlighted the potential impact on tax compliance efforts. They warned that diminishing the compliance workforce could further enable high-income tax evasion, especially among wealthy taxpayers and large businesses. Their apprehensions stemmed from the fear that fewer agents would mean less capacity to tackle complex tax avoidance strategies effectively. Simultaneously, Washington D.C. has witnessed a noteworthy rise in homes for sale amid these federal layoffs. As the federal workforce faces cuts, many employees are listing their homes, leading to a record surge of 25.1% in active home listings year-over-year by April 2025. This market shift reflects the ongoing implications of federal hiring freezes and layoffs, primarily driven by the austerity efforts associated with DOGE. Although the number of homes for sale has increased, real estate agents have noted that the housing market remains tight, indicating that demand still outstrips supply before these changes. The situation underscores the broader consequences of reduced government employment on local economies and public sentiment.