Employee Losses

Over the past decade, the IRS has faced a steady decline in its workforce. This decline has been driven by a combination of factors:

Mass Retirements: A large portion of the IRS workforce has reached retirement age. Many of these retirees held critical positions in auditing, investigations, and customer service, taking decades of institutional knowledge with them.

Hiring Freezes and Budget Cuts: Ongoing budget restrictions, particularly from the early 2010s through the late 2010s, imposed hiring freezes and limited the agency’s ability to replace departing employees.

Shrinking Headcount: The IRS workforce has shrunk by over 20% since 2010. For example, staffing in enforcement roles alone declined by nearly 30%, leading to a significant drop in audit rates.

Reduced Recruitment Appeal: Aging technology, pay limitations, and the public scrutiny of federal agencies have made it harder for the IRS to compete for young or specialized talent in tech and analytics fields.

Potential for More Cuts

While the Inflation Reduction Act (IRA) of 2022 allocated nearly $80 billion in additional funding to the IRS over a decade, the agency’s long-term outlook remains uncertain due to ongoing political opposition:

Rollback Proposals: Several congressional proposals, particularly from fiscal conservatives, aim to rescind much of the IRA funding—especially the portions earmarked for enforcement and compliance initiatives.

Hiring Targets at Risk: The IRS planned to hire thousands of agents, IT specialists, and service representatives with this funding. Rollbacks could halt or reverse these initiatives midstream.

Short-Term vs. Long-Term Spending: Some lawmakers advocate redirecting IRS funding toward deficit reduction, rather than sustaining a long-term investment in infrastructure and staffing.

Impact

The decline in staffing and uncertain funding environment directly affects the IRS’s ability to perform its core mission:

Customer Service:

During the pandemic, customer service lines answered as little as 10–15% of calls.

Even in recovery phases, long call wait times and processing delays have persisted, frustrating taxpayers.

Audits and Enforcement:

Audit rates have plummeted, especially for high-income earners and large corporations. For instance, audit rates for taxpayers earning over $1 million dropped from 8.4% in 2010 to around 0.7% in recent years.

This has contributed to a widening tax gap—the difference between taxes owed and taxes collected—estimated to exceed $600 billion annually.

Modernization Challenges:

The IRS continues to rely on outdated mainframe technology from the 1960s and 1970s.

A lack of skilled personnel and consistent funding has stalled many modernization projects, leaving the agency vulnerable to inefficiencies and cybersecurity risks.

Future Outlook

Despite these challenges, the IRS is pursuing a strategic rebuilding effort:

IRA Investment in Modernization:

Funds are being used to improve data analytics, fraud detection, and the rollout of digital tools like expanded e-filing systems and real-time taxpayer account access.

Strategic Hiring Plan:

The IRS aims to onboard tens of thousands of new employees through 2031, including agents, tech experts, and data scientists, to replace retirees and build 21st-century capabilities.

Dependency on Political Will:

The long-term success of these initiatives hinges on congressional support.

If IRA funding remains intact, the IRS could regain lost ground and better serve taxpayers. If not, the agency risks continued decline in performance, enforcement, and public trust.