IRS Layoffs and How it Impacts Taxpayers

The Trump Administration has directed the Internal Revenue Service to draft plans to cut its workforce by as much as half through a mix of layoffs, attrition, and incentive buyouts. This comes after the IRS laid off 7,000 probationary workers in February.

Taxpayers will begin to feel the affects of the reduction in staffing and should be aware of how it might impact them. 

Over the past two years, the IRS had significantly reduced call wait times from over 30+ minutes down to just 3 minutes. With the proposed staffing cuts, taxpayers should prepare for increased wait times, leading for increased difficulties resolving issues. 

Staffing shortages could lead the IRS to issue more Notices of Deficiencies rather than allowing disputes to be resolved through the IRS Independent Office of Appeals. This change would force more taxpayers to challenges the assessments in U.S. Tax Court. This would increase legal fees on taxpayers, adding complexity and delays to resolving the matter. 

Further, if a taxpayer is under audit and the assigned auditor is laid off, taxpayers may have to endure and extended period under audit until another agent can be assigned to the case. 

To prepare for these changes, taxpayers should ensure they have retained critical IRS documents, such as their accepted SS-4s, S Corporation approval letter, any communications abating penalties or closing a matter. 

IRS layoffs could have far-reaching effects on taxpayers, from delayed responses to increased legal challenges. Staying proactive can help mitigate potential issues.