Since early 2025, the IRS has faced significant internal disruption following executive orders focused on downsizing the federal workforce and DOGE-led efforts to identify and eliminate inefficiencies. These measures triggered a wave of retirements, terminations, and indefinite reassignments, leaving many employees without clear roles or guidance. Leadership turnover has further contributed to the instability, with key decision-makers departing and no clear direction in place. Although DOGE’s mandate centered on rooting out government waste, something we can all agree on, the immediate result has been widespread operational disruption across the agency. In this environment, navigating IRS processes (especially those related to negotiating installment agreements and subordinations of federal tax lien) have become increasingly complex, heightening the need for taxpayers (and lenders) to work with a trusted representative who understands the shifting landscape and knows how to navigate the uncertainty with confidence.
Mass Departures and Workforce Cuts: The IRS Faces a Staffing Crisis
IRS employees are leaving the agency in a mass exodus, taking with them an irreplaceable wealth of knowledge. Early in 2025, the federal government issued the reduction-in-force (RIF) plan to reduce the size of the federal government’s workforce. The Office of Personnel Management (OPM) issued guidance related to probationary employee terminations, directing agencies to terminate employees generally hired by those agencies within the past year. OPM also provided guidance for the deferred resignation program (DRP), allowing employees to voluntarily resign with pay through September 30, 2025. A version of the resignation program specific to the Treasury Department (the TDRP) was introduced in April 2025, alongside two additional IRS voluntary separation programs – the voluntary separation incentive payment and the voluntary early retirement authority.
The May 2025 Treasury Inspector General for Tax Administration (TIGTA) report provided an update on the IRS’s efforts to reduce its workforce. As of March 2025, over 11,000 IRS employees, approximately 11% of the agency’s workforce, either resigned, opting into the initial DRP, or were terminated during the probationary period. These departures affected some IRS units and job roles more than others. For example, revenue agents saw a particularly steep 31% separation rate, compared with just 5% in IT management. A total reduction in the IRS’s workforce of 25% is expected overall, with approximately 23,000 additional IRS employees expected to resign in the second TDRP waive.
Although some departments are being hit harder than others, all aspects of the IRS will be impacted, especially taxpayer assistance. As the number of revenue agents and officers declines, the level of customer service will decline as well. In their place, the IRS will likely rely more heavily on correspondence audits, which are less-formal examinations conducted through written communication that do not involve a designated individual contact. As anyone who has called an IRS 800 number knows, it’s beyond frustrating to sit on hold for an hour and speak with a different representative in each conversation (reexplaining the issue each time), only to be given a different, non-helpful response (assuming you aren’t disconnected). With the IRS’s focus on correspondence and automation, taxpayers will have limited avenues for direct engagement with the IRS, complicating efforts to clarify issues and dragging out timeframes to resolve them.
Leadership Void: the IRS Faces Instability at the Top
In 2025, determining who will act as IRS commissioner more closely resembles a game of music chairs. The IRS is on its fifth commissioner so far this year. The new acting commissioner is Michael Faulkender, who will pull double duty in helping to lead the IRS while also serving as deputy secretary of the Treasury. President Trump’s nominee for the role, who was recently confirmed by the Senate, is a former auctioneer with no experience and a questionable track record regarding Employee Retention Credits. Continued turnover and limited experience at the top raises concerns about the IRS’s ability to maintain effective leadership during a critical period.
Additionally, there have been other high-level IRS officials who have left the IRS. To name a few: the chief information officer, the chief tax compliance officer, the chief privacy officer, the chief implementation officer, and the chief transformation and strategy officer. This revolving door of leadership leaves the agency without consistent strategic direction at a time when stability and informed decision-making are essential to managing both internal reforms and external taxpayer needs.
Less People, More Automation? Not So Fast
The Inflation Reduction Act of 2022 provided the IRS with an unprecedented $80 billion in funding over a ten-year period, intended to modernize its outdated infrastructure, enhance enforcement capabilities, and improve taxpayer services (mostly through hiring people to answer the phone). In the months that followed, the IRS initiated several long-overdue upgrades, including replacing legacy case management systems, deploying updated hardware, and launching the Direct File pilot program.
However, that progress was short-lived. Congress subsequently reduced funding to $37.6 billion as of March 31, 2025, and no additional appropriations have been made to support continued automation and modernization efforts. To compound the problem, DOGE effectively paused key initiatives for automation, despite assertions that its objective was to exchange labor-intensive processes for more efficient, technology-driven solutions. The IRS now faces a dual deficiency of insufficient staffing and inefficient technology, leaving it ill-equipped to operate under either a traditional or modernized framework. A broken IRS sounds great, unless and until you need something from them (like an installment agreement and subordination of federal tax lien).
Resetting Expectations
In light of the ongoing structural and operational changes/challenges at the IRS, taxpayers and lenders should anticipate substantial deviations from the typical timeline for resolving tax liabilities. Staffing reductions, reassignments, and delays in modernization efforts have collectively disrupted standard processing procedures. Revenue Officers are popping up, filing federal tax liens, and then retiring. The beyond-frustrating “game” of whack-a-mole leaves taxpayers and lenders in limbo, unable to reach anyone at the IRS to resolve the liability before the lender’s collateral is at risk. Although inefficient, the IRS’s staffing deficiencies do not preclude the successful resolution of outstanding issues. Tax Guard’s process for resolution, negotiating an installment agreement and lien subordination, remains available and effective; the underlying framework has not changed. What has changed is the administrative process, which may now require a more strategic and adaptable approach to navigate efficiently (e.g., “pending” status for installment agreements and/or Collection Due Process appeals to ensure the IRS cannot take enforced collection (levies) during the negotiation process).
Navigating Uncertainty with Skilled Representation
The challenges the IRS faces today have fundamentally altered how the agency operates, and how quickly and effectively it responds. In this new environment, successful tax resolution depends not just on knowing the rules, but on understanding how to apply them within a system that no longer functions as intended. Taxpayers, lenders, and advisors must adapt accordingly, approaching every case proactively before the IRS takes enforced collection actions. Given the depth and pace of institutional change within the IRS, skilled representation is no longer a matter of convenience—it is a practical necessity.
Written by: Rachel Libowitz and Jason Peckham, Esq.