The Internal Revenue Service could begin looking to downsize its workforce as soon as 2026, its top official warned on Thursday, suggesting without additional funding the agency will have to unwind its ongoing hiring surge.
The cutbacks could come in the form of separation incentives, followed by furloughs and, as a last resort, reductions in force, IRS Commissioner Danny Werfel told reporters. The warning came as the agency is seeking an extension of the unprecedented funding surge the agency received as part of the 2022 Inflation Reduction Act, which originally injected $80 billion into the tax agency’s coffers.
Some of the accounts that received appropriations through President Biden’s tax, climate and health care bill will be drained by fiscal 2026, Werfel said, leaving the agency facing a series of fiscal cliffs.
In its recent budget request, IRS requested the funding boost be extended through fiscal 2034 for a total price tag of $104 billion. Doing so, it said, would enable it to fully meet taxpayer needs while returning more than three times the investment back to the U.S. Treasury by increasing tax collection on high-earning individuals and corporations.
IRS on Thursday laid out its vision for spending its cash infusion—since trimmed to $60 billion over a 10-year period—for the next two years as part of an update to its strategic operating plan. In fiscal 2025, IRS will boost live assistance, expand online services, accelerate the digitization of forms and disrupt tax scams.
