Thousands are Being Fired at the IRS. A Smart Move or a Dangerous Mistake?

Many people who know me well, call me a pessimist.? I'd change but it's just hopeless ;).?

Often there are two sides battling it out and really the pessimist just makes stronger arguments.? Last week there were massive IRS layoffs with more coming, triggering the conflicting debate.? Here is a fun way of seeing the internal struggle I have on the topic.

What follows is a debate between these two perspectives. One optimistic about change, the other cautious about the potential fallout. You tell me if I'm a pessimist or it just makes more sense?

Optimist: "These layoffs could actually be the catalyst for long-needed reform. With fewer employees, the IRS might invest in modern digital solutions, streamlining processes and cutting red tape. In the long run, taxpayers might benefit from faster, more efficient services and tax preparers could seize the opportunity to offer innovative, tech-driven solutions to help their clients navigate a more modernized tax system."

Pessimist: "I see it differently. Thousands of layoffs mean that the agency could be overwhelmed, at least initially, especially considering that this is happening right in the middle of tax season. The timing couldn’t be worse. Fewer staff could translate into longer wait times, more processing errors, and a reduced capacity to handle complex issues just as millions of taxpayers are trying to file on time. Taxpayers might experience frustrating delays and confusion when they need support the most, and tax preparers could find themselves burdened with even more troubleshooting and client support as the system stumbles through its transition. With heightened demand during peak season, this disruption could lead to chaos that ripples across the entire tax ecosystem."

Optimist: "That's a fair point. Change always comes with growing pains. But if the IRS can redirect cost savings from a leaner workforce into advanced technology and training, we might see a smoother, more agile operation. Tax preparers might even benefit from a system that automates routine tasks, allowing them to focus on more nuanced advisory roles."

Pessimist: "That’s the hope but it’s a big if. The real risk is that the abrupt reduction in staff leaves the IRS unprepared for the surge in taxpayer inquiries and potential system glitches. For taxpayers, this could mean a backlog of unresolved issues and delays in receiving refunds. For tax preparers, the fallout might be an increase in error-prone filings and more time spent on rectifying mistakes that a fully staffed IRS might have otherwise prevented."

Optimist: "I think this could be the shake-up the IRS needs. Thousands of layoffs might sound alarming, but it could force the agency to modernize and cut wasteful spending. Let’s face it—the IRS has a reputation for inefficiency.?Based on recent statements by IRS leadership, about half of the IRS workforce is working remotely. In a February 2024 congressional hearing, IRS Commissioner Daniel Werfel noted that roughly 50% of IRS employees were working from remote locations while the other half were on site."

Pessimist: "Or it could be a disaster in disguise. The IRS might have its inefficiencies, sure, but the reality is that it’s responsible for bringing in the majority of the government’s budget. Laying off thousands could cripple its ability to collect revenue effectively. Without those employees, the system could buckle under the pressure, delaying refunds, causing processing errors, and leaving taxpayers in limbo."

Optimist: "Still, there’s a bigger picture here. Trump’s administration wants to reduce the dependency of the U.S. budget on American taxpayers and shift some of that burden toward external revenue sources. Things like tariffs, international trade deals, or foreign investments. If that vision takes hold, maybe the IRS won’t need to be such a massive machine."

Pessimist: "But we’re not there yet. That strategy isn’t fully developed, and until it is, cutting back on the IRS could destabilize the very system that keeps the country running. The U.S. government still relies heavily on domestic taxpayers for revenue. Making drastic changes before alternative systems are in place is a huge gamble."

Optimist: "But think about the waste involved in keeping an outdated, overstaffed system running. This could be an opportunity to streamline and automate processes. And for tax preparers? It might mean less hassle dealing with auditors since there will be fewer audits happening. Maybe a smaller IRS could also help reduce the perception of government overreach into citizens' financial affairs. With fewer employees, the agency might scale back on intrusive audits and excessive monitoring, allowing taxpayers to feel a greater sense of financial privacy and autonomy. This shift could restore public trust by making the system feel less intimidating and more focused on essential functions."

Pessimist: "Fewer audits might sound good on paper, but it comes with serious risks. Fewer audits could embolden tax evasion and create a perception that the system is weak. Plus, with fewer human employees, who’s going to handle the inevitable flood of incorrect notices issued by machines? Automated systems aren’t perfect. Without enough staff to fix errors, taxpayers, and tax preparers, will be stuck trying to resolve issues with an unresponsive IRS. With fewer IRS employees, customer service will take a massive hit. That means more mistakes, longer response times, and more work falling on tax preparers. Instead of dealing with the IRS directly, clients will come to their accountant for help, expecting them to clean up the mess. It’s not just about audits, it’s about keeping the system functioning properly."

Optimist: "That could open new business opportunities for tax preparers, though. More demand for expert help means more clients and potentially higher fees."

Pessimist: "That’s a short-term silver lining at best. Long-term, it creates more stress and increases the burden on professionals trying to help taxpayers navigate a broken system. Plus, imagine the frustration for taxpayers who can’t get help from the IRS and have to pay out-of-pocket just to get basic issues resolved."

Optimist: "It’s a risk, sure, but it could also be the push needed for meaningful reform. If the IRS and the government adapt correctly, taxpayers and professionals alike could benefit from a more streamlined, modern tax system."

Pessimist: "Let’s hope that’s how it plays out—but I’m not holding my breath. For now, this feels like a step backward, not forward."

Yaacov Prime: Maybe it’s not about picking one side over the other. The reality is that both perspectives hold truth. The IRS certainly could use an overhaul and big improvements quickly. Customer service is terrible, and there is way too much complexity and not too long ago, the IRS burned over 2 million pieces of mail because they couldn't keep up. Things will certainly get worse before they get better though, and I am not excited to see what that is going to look like.