IRS makes a drastic decision that could impact tax returns | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Over the past two months, the IRS has sparked major concern after it began dramatically cutting jobs nationwide while processing millions of tax returns during tax season.

In February, the IRS fired 7,000 employees, which impacted workers in tax compliance departments who had worked at the organization for about one year or less, according to an Associated Press report.

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These departments ensure taxpayers follow tax laws, correctly report their income, file their returns, etc.

Last month, the IRS reportedly began contemplating halving its workforce of about 90,000 through layoffs, incentivized buyouts, and attrition (a hiring freeze).

This involves shrinking several crucial departments that help assist Americans with taxes by May 15. For example, staff at the IRS’ Taxpayer Advocate Service branch, which helps Americans facing financial issues, is set to be cut by 20%.

The IRS’ Direct File department, which manages an online tool that allows taxpayers to file their federal taxes for free electronically, will also let go 30% of its staff.

The Tax Withholding Estimator is a free IRS tool that can help you figure out your federal income tax withholding.

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The IRS sends a surprising email to fired employees

Since the job cuts in February, court decisions in Maryland and California last month ordered the IRS to rehire the employees; however, the Trump administration appealed both rulings.

The workers have since been on paid administrative leave, but it looks like some of them will be returning to work very soon as the tax deadline nears.

According to a new report from Bloomberg, the IRS recently emailed a few of the workers it fired to notify them that they could return to work full-time on April 14. The last day for Americans to file taxes is April 15.

The email even states that workers won’t have to give up their outside jobs to return to work, which signals that the agency may need the boost in support to help process tax returns before the tax deadline.

“Please know that outside employment does not necessarily prevent you from returning to work,” read the email.

So far, the IRS has received about 89 million tax returns this year, and it has only processed roughly 88 million, according to recent data on the agency’s website.

Trump has big plans for the IRS

The IRS’ job cuts come as Elon Musk, who runs the Department of Government Efficiency (DOGE), and President Donald Trump have been ramping up efforts to shrink the federal government.

The Trump administration’s main goals with these federal job cuts are to “eliminate unnecessary programs” and “reduce bureaucratic inefficiency,” according to an executive order the president signed last month.

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So far, over 59,000 government employees have been laid off by DOGE, and over 136,000 federal employees have chosen to depart.

Trump specifically has major plans for the IRS. In a recent interview with Fox News, U.S. Secretary of Commerce Howard Lutnick said that Trump aims to abolish the IRS and replace it with a service that collects revenue from tariffs, which would fund the U.S. government.

“Donald Trump announced the External Revenue Service, and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay,” said Lutnick in the interview.

Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price increases.

The IRS is also about to play a significant role in cracking down on illegal immigration. The U.S. Immigration and Customs Enforcement (ICE) and the IRS are nearing an agreement that will allow ICE to access the IRS’ database to verify the names and addresses of taxpayers suspected of residing in the U.S. illegally.