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What’s Going on With the IRS?

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First seen March 20, 2026 10:59:52

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This is an edition of The Atlantic Daily, a newsletter that guides you through the biggest stories of the day, helps you discover new ideas, and recommends the best in culture. Sign up for it here. Etched into the facade of the Internal Revenue Service’s headquarters, just above a trio of limestone arches, is a quote from Supreme Court Justice Oliver Wendell Holmes Jr.: “Taxes are what we pay for a civilized society.” But today’s IRS, weakened by the Trump administration’s budget cuts, may not be well-equipped to collect. The office of the Treasury Inspector General for Tax Administration, a federal watchdog, put out a memo in January highlighting its “concerns” about the IRS’s readiness for the 2026 filing season, most of which are downstream from staffing. The agency had more than 100,000 staffers (accountants, lawyers, customer-service specialists, and more) toward the end of 2024; a year later, firings and buyouts had lowered that number to about 81,000. That it lost nearly a fifth of its employees will likely affect its ability to tackle existing problems, such as backlogs of returns and outdated technology, and introduce new ones that will slow it even further. The current political climate has only complicated things. In the past, the agency encouraged undocumented people to file returns and promised to keep their information private. But during last year’s tax season, amid the Trump administration’s aggressive immigration-enforcement push, the IRS funneled data from protected tax records to the Department of Homeland Security. The National Immigration Law Center has suggested that if people don’t want to take the risk of filing this year, “the IRS will likely bring in less revenue while also spreading fear and confusion in immigrant communities.” At the same time, President Trump is currently suing the IRS for mishandling his own information (his returns were leaked to the press during his first term). He’s seeking at least $10 billion in damages, all of which would come directly from American taxpayers, should he win the case. The agency also hasn’t had an official commissioner since August, when Trump removed the former congressman Billy Long from the post. Treasury Secretary Scott Bessent had been doing double duty as the acting commissioner, but the IRS announced last week that his term had expired. Since October, Social Security Administration Commissioner Frank Bisignano has been serving as the first-ever IRS CEO—now the agency’s de facto top dog. At this point in the filing season, there have been no indications that the IRS is unable to handle its essential responsibilities. But the warning signs are clear. One major consequence of the Trump administration’s efforts to reduce staff across government agencies is that many of the most senior employees—the ones with the greatest institutional knowledge and experience—have opted for buyouts. Mark Mazur, who developed tax policy for the Obama and Biden administrations, told me that the exodus could impede everything from “operations to collections to complex audits.” The IRS has long had a pretty senior workforce (as of late 2023, 18 percent of employees were eligible for retirement, with another 37 percent estimated to become eligible over the next five years), which, Mazur said, probably compounded the issue: “Thousands of people just said, You’re gonna pay me for nine months to not work and then I can retire? Sign me up!” The agency’s staffing shortage could affect its ability to close the “tax gap,” or the difference between what the IRS is owed each year and what it’s actually able to harvest from taxpayers. The national tax-compliance rate is high—somewhere north of 80 percent—but the gap is still significant. In 2021, it was hovering around $600 billion, or approximately 3 percent of America’s GDP at the time. In recent years, the IRS has also had to contend with the backlog of tax returns that piled up during the coronavirus pandemic; as of December, 2 million returns from previous years were still waiting to be processed. The greater the tax gap, and the bigger the pileup, the less tax revenue the federal government is pulling in each year. For that reason, it turns out that federal spending on the IRS is actually a good way for the government to make more money. For every dollar the IRS spends auditing someone in the top-10 percentile for income, it gets $12 back, per the National Bureau of Economic Research. The IRS is often compared to the accounts-receivable department of a private-sector business. “That’s one of the last places you would trim, because you want to make sure you get paid for the work that you do,” Mazur said. “And similarly, you would think the government would want to get paid for the goods and services that it provides.” The cuts have also triggered an unprecedented “all-hands-on-deck situation” for the IRS’s customer-service team, Danny Werfel, the IRS commissioner from 2023 to 2025, told me. Millions of people call the IRS with questions about their returns (there are limited options for getting in touch with the agency) and competent phone service plays a large role in helping them figure out what they owe. The accounts-management program, which oversees customer service, improved its once-abysmal phone service during the Biden administration, thanks to billions of dollars in fresh funding from the Inflation Reduction Act of 2022. But the division lost more than 4,000 employees amid last year’s reductions. This year, employees from different divisions at the agency have had to be transferred over to the phones—regardless of whether they have any knowledge of how to handle incoming calls. Some parts of the IRS are shiny and new—the agency has lately been deploying AI to sift through submissions—yet other, more essential components of its infrastructure were coded with the decades-old programming language COBOL. The agency’s digital-file database, which dates back to the early 1960s, holds the Guinness World Record for oldest software system in continuous use. In her June report to Congress, National Taxpayer Advocate Erin M. Collins, another IRS watchdog, noted that the workforce reduction would impede the agency’s ability to carry out its objectives—technological modernization chief among them. The IRS represents the kind of sclerotic bureaucracy that Trump claims he wants to overhaul. His first administration tried to rethink tax returns by putting them on forms the size of a postcard, and his second administration at one point sought to replace the Internal Revenue Service—and income taxes—with an External Revenue Service funded by tariffs (neither idea materialized). The problem is that by taking a hatchet to the agency, the president has effectively undercut his own goal of waste reduction. The experts I spoke with agreed that the IRS isn’t on the verge of imploding anytime soon (meaning you’ll still need to pay your taxes this year). But in divesting from the agency, the administration is threatening to weaken the principle that Holmes describes. A well-functioning society, he reminds us, always comes at a cost. Related:

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