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The Internal Revenue Service is set to lay off approximately 6,700 employees, a restructuring move that could strain the agency’s ability to process tax returns and issue refunds during the critical filing season.
Over 6,000 employees – more than 6% of the total IRS workforce – are expected to be terminated by the end of this week, with more than 3,500 from the Small Business/Self-Employed Division, according to an email obtained by CBS News.
The layoffs, primarily targeting auditors and collection staff, are part of a broader federal workforce reduction initiative by the Department of Government Efficiency , overseen by Elon Musk under President Donald Trump’s administration. This initiative – aimed at cutting government expenditures by $2 trillion – has led to concerns about enforcement capabilities and taxpayer services.
Elon Musk’s involvement in the restructuring includes a controversial directive requiring federal employees to submit weekly reports or face termination. The email, sent to multiple agencies, caused confusion, with some departments advising employees to delay responses until further instructions were issued. Employee unions have criticized the mandate, citing intimidation and legal concerns.
The IRS downsizing coincides with tax season, raising concerns about delays in processing returns and issuing refunds. With over 5,000 audit and collection positions eliminated, enforcement efforts could weaken, potentially leading to a decline in compliance and revenue collection. Critics argue the layoffs could increase the federal deficit by reducing tax enforcement effectiveness. The layoffs are expected to take place just weeks before the tax filing season reaches peak activity in mid-March through mid-April.
Taxpayers concerned about delays in refunds are advised to file early, ensure accuracy in their returns to avoid processing issues, and use electronic filing methods with direct deposit to expedite refunds. The IRS recommends filing taxes before the April 15 deadline, checking the “Where’s My Refund?” tool on its website for updates, and seeking assistance from tax professionals if needed. Individuals facing financial hardship due to refund delays may also qualify for short-term relief programs.
According to the email obtained by CBS News, managers of the Small Business/Self-Employed Division were informed that the IRS Human Capital Office would notify affected employees. The email instructed managers to ensure that employees scheduled for leave report to the office with their equipment. For work from home employees, managers were asked to arrange remote notices and coordinate with IT for prepaid labels and boxes to return government-issued equipment.
The guidance noted that terminated employees would be paid for the full day, with administrative leave covering the remainder of the day after their departure. Probationary workers, who have been with the agency for less than a year, were explicitly noted as not entitled to severance pay. The email also stated that these probationary employees were not considered “critical to filing season.”
Acting IRS Commissioner Doug O’Donnell, who has served for four decades, announced his retirement amid these changes. He will be replaced by Chief Operating Officer Melanie Krause as interim commissioner. The transition comes as the IRS navigates restructuring challenges, with additional job cuts expected.
Federal agencies affected by Musk’s directive include the Federal Emergency Management Agency, the Centers for Disease Control and Prevention, and the Department of Energy. Some agencies, including the Pentagon and the FBI, have advised employees to hold off on responding until they receive further legal guidance.
The layoffs reflect a broader trend of federal workforce reductions, with approximately 30,000 positions cut since January. The IRS is carrying out some of the highest numbers of mass terminations known so far at a department or agency. Managers in the Large Business & International Division were also asked to come into the office to support offboarding activities.
Concerns about privacy and data security have also emerged, as DOGE has attempted to access IRS systems. The Treasury Department has assured that individual taxpayer information remains protected, though watchdog groups warn of potential risks associated with such access. Democratic lawmakers have raised concerns that Musk’s cost-cutting task force at the IRS could delay refunds and compromise taxpayer information.
The IRS workforce reduction, particularly during tax season, has drawn sharp criticism from tax professionals, lawmakers, and policy experts. They warn of prolonged wait times, an increased backlog of returns, and diminished enforcement that could embolden tax evasion.
Kevin Hassett, director of the White House’s National Economic Council, defended the layoffs, stating, “Our objective is to make sure that the employees that we pay are being productive and effective.”
Treasury Secretary Scott Bessent has suggested that more than 3,500 IRS positions could be cut. As restructuring efforts continue, the long-term impact on taxpayers and government revenue remains uncertain.
