The IRS Ran a Filing Season With a Quarter Fewer People
Agency leadership says processing targets were met after a 27% reduction in staff, while auditors and employee groups question how long technology can substitute for headcount.
The Internal Revenue Service completed the 2026 filing season having shed roughly 27% of its workforce, and its leadership has declared the experiment a success.
More than 28,000 employees have left the agency since early 2025 through separations, deferred resignations and terminations. Budget documents indicate plans to reduce headcount by several thousand more, with the agency projecting savings above $777 million from a further reduction of roughly 4,875 positions.
The technology bet
The strategy rests on a claim that is easy to state and hard to verify: that modernization can substitute for staff. Agency plans emphasize converting legacy code — some of it written in programming languages that predate most of its current employees — into modern systems, with generative AI tools doing a share of the translation work.
The stated goal is to complete most modernization within two years.
Where the auditors disagree
Government auditors and employee representatives have raised a narrower objection than "cuts are bad." Their concern is sequencing and transparency: the reductions have happened first, and the plans describing how technology will cover the gap have been neither detailed nor public.
The IT organization itself has not been spared. The agency lost more than 2,600 IT employees during 2025, a reduction of roughly 31%, according to the National Taxpayer Advocate — which raises the question of who executes a two-year modernization program.
What taxpayers experienced
Straightforward electronic returns processed normally, and refunds flowed faster than in several prior years. The strain appeared elsewhere: phone service, correspondence handling, amended returns, identity verification and any matter requiring a human decision.
That distribution is predictable. Automated processes scale with servers; everything else scales with people.
The revenue question
The Budget Lab at Yale and other analysts have argued that a weakened IRS costs more than it saves, because enforcement and service capacity are what convert filed returns into collected revenue.
The agency's response is that enforcement is being redirected rather than reduced — with audit rates rising sharply for large corporations and very high-income individuals while overall audit coverage falls.
