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In 2022, the US Congress invested $80 billion in the Internal Revenue Service (IRS) to modernise the agency, the IRS lost a significant number of workers and underwent a radical shift under the Trump administration. The agency’s ability to handle tax returns and manage its staff suffered greatly in the aftermath. The IRS has not had a Senate-confirmed commissioner since President Trump fired the previous one, a move that has been heavily criticised and led to a leadership vacuum.
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IRS Woes: From Efficiency to Dysfunction
Despite its unpopularity, the Internal Revenue Service (IRS) was once regarded as a potential forerunner in governmental efficiency. However, a series of events and decisions have resulted in a stark reversal of fortunes.
A Glimpse of a New Future
In 2022, the Inflation Reduction Act granted the IRS an investment of $80 billion as part of an ambitious modernization effort. A comprehensive 200-page plan submitted by then-IRS Commissioner Danny Werfel laid out a vision for a more efficient and technologically advanced agency. This vision included initiatives like Direct File, a free filing service that debuted in 2024 to glowing reviews and taxpayer approval. The IRS also bolstered its workforce with thousands of new hires.
The Downwards Spiral
However, this forward momentum came to an abrupt halt. According to Werfel, efforts to improve the IRS were not only stalled but turned around entirely. Elon Musk’s “Department of Government Efficiency” reversed the funding approved by Congress, dismissed thousands of employees, and scrapped Werfel’s modernization strategy. The Inspector General for Tax Administration disclosed that from January 2025 to January 2026, the IRS lost 31,000 workers.
Symptoms of Dysfunction
The repercussions of these developments are evident:
- According to the National Taxpayer Advocate’s mid-year report, the recent tax season was fraught with challenges for millions of taxpayers. Issues ranged from delayed refunds to difficulties in obtaining assistance.
- The IRS has been operating without a Senate-confirmed commissioner since President Donald Trump dismissed Billy Long. Trump subsequently nominated Social Security Commissioner Frank Bisignano as the “CEO” of the agency, a move Senate Democrats criticized as circumventing Congressional oversight.
- Despite lacking legal clearance, the IRS has given nearly 47,000 addresses to immigration authorities, according to a report from the Inspector General for Tax Administration.
- The significant reduction in the IRS staff has led to a decline in audits, particularly for wealthier taxpayers. The “Global High Wealth Unit” lost 38 percent of its staff. The unit was responsible for monitoring billionaires.
Werfel emphasized the importance of a reliable tax system for any industrialized country’s stability and growth. “There’s not an industrialized nation in the world that can exist and flourish if the tax system is chaotic,” he said.
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