Thursday, April 16, 2026

The IRS has cycled through seven agency chiefs in the year since President Donald Trump re-entered the Oval Office last year. There are roughly 20% fewer IRS employees compared to the end of October. 2024, the product of mass firings and resignations. In addition, the IRS is exhausting a Biden-era pot of money that once totaled $80 billion and enabled it to improve taxpayer services and pursue cases of tax evasion.

“This entire year has been a stress test for the IRS,” said Andrew Lautz, director of tax policy at the Bipartisan Policy Center think tank.

One of the IRS’s chief tasks is administering the slate of new tax policies that Trump signed into law last year, such as no tax on tips and overtime pay, along with the expanded standard deduction for seniors. Republicans hope the tax breaks lead to bigger refunds that reach families and provide a political boost heading into the November midterms.

Indeed, the White House on Monday staged a Doordash delivery in which Trump tipped a driver $100 for a McDonald’s order to highlight no tax on tips, which allows some workers in certain occupations to exempt up to $25,000 in tipped income.

That might not even be the tax measure that’s most popular among Americans. So far, over one in five tax filers are claiming the deduction for no tax on overtime, according to the Wall Street Journal. Frank Bisignano, chief executive of the IRS, told Congress last month that over 40% of tax filings claimed at least one of the new GOP policies.

If Trump has his way, the IRS will continue to shrink in line with longstanding Republican goals of diminishing its reach. The annual White House budget request to Congress would set aside $9.8 billion for fiscal year 2027, a $1.4 billion reduction from the $11.2 billion the IRS received for the current fiscal year.

The sizable cuts also threaten the IRS’s ability to harness artificial intelligence in the years ahead, compounding difficulties with modernizing tax administration in an agency that often relies on outdated technology.

Even then, AI is booming within the IRS.

The Government Accountability Office reported last month that the IRS had recorded 126 instances in which AI was used to carry out its responsibilities, more than a tenfold increase from only 10 in June 2022. The bulk of those tasks centered on enhancing tax compliance and detecting fraud.

“Major staffing reductions at IRS in 2025 could greatly affect its ability to use AI,” the GAO said in its report. It noted the Research, Applied Analytics and Statistics arm of the IRS reported shedding 63 employees who were working either full- or part-time on developing AI.

An IRS official — not AI — still has a final say in pursuing audits. Early IRS data shows that audits of tax filers with at least $10 million in income dropped by half in the 2025 fiscal year compared to the prior one.

Despite Republican attempts to slash IRS funding, bipartisan support still exists for strengthening the tax collection agency’s ability to service taxpayers. Sens. Ron Wyden of Oregon and Mike Crapo of Idaho released a legislative package in late February to keep modernizing the agency.

“The process of filing your tax return and receiving your refund should be simple and fast,” Crapo said at the time. A slice of the reforms were focused on upgrading the IRS to allow taxpayers to determine the specific date of their refunds.

“There are areas like taxpayer services and modernization where both parties have been willing to fund and even increase funding at the IRS in recent years,” Lautz said. “Enforcement is still kind of the big partisan disagreement in recent years.”

Trump has left his stamp on the U.S. tax collection agency. Most Democrats still support a robust IRS, though lawmakers are rolling out proposals to eliminate federal income tax entirely for low-income taxpayers.

— Joseph Zeballos-Roig

The IMF released its annual growth forecast on Tuesday, projecting a 3.1% rate of global expansion assuming a short-lived conflict between the U.S. and Iran.