The Internal Revenue Service has lost nearly a third of its audit workforce as part of the Trump administration’s sweeping federal layoffs, raising concerns about future tax enforcement and revenue collection. However, a federal judge has now halted further reductions across multiple agencies, including the IRS, citing constitutional concerns.
IRS sheds nearly one-third of auditors
According to a report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS lost about 31% of its revenue agents — roughly 3,600 workers — in the first three months of 2025. These staff cuts disproportionately hit the agency’s auditing force, which plays a critical role in enforcing compliance among high-income individuals and corporations.
The broader IRS workforce shrank by more than 11% by March, and officials estimated total cuts could reach 40% by year’s end, pending legal developments.
Court blocks layoffs, questions legality
On May 22, U.S. District Judge Susan Illston signaled she would extend a court order blocking layoffs across federal agencies. The ruling followed lawsuits challenging President Trump’s executive order directing agencies to carry out mass reductions in force (RIFs) under guidance from the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM).
Judge Illston said the White House had likely overstepped constitutional limits by imposing large-scale reorganizations without congressional approval. Her initial freeze stopped layoffs at over a dozen departments and agencies, including the IRS, EPA, VA, and Treasury.
“The evidence suggests the executive branch usurped Congress’s constitutional powers,” Illston said during the hearing.
DOGE’s role and Musk’s involvement
The Department of Government Efficiency (DOGE), a Trump-era initiative led in part by Tesla CEO Elon Musk, has been instrumental in driving the layoffs. The department promoted voluntary exits via a “deferred resignation” program but also initiated widespread terminations, especially of junior or recently hired employees.
Musk defended DOGE’s work as targeting “waste and fraud,” while the Biden administration called the layoffs a roll back of necessary hiring that occurred under its tenure. A Treasury spokesperson said most IRS exits were voluntary, but watchdog groups warn the result is a crippling reduction in enforcement capacity.
Revenue loss could outweigh savings
Experts warn that the auditor cuts could severely reduce tax compliance. TIGTA estimated that audits of wealthy Americans in FY 2023 brought in $32 billion in additional tax assessments. Independent research suggests every dollar spent on auditing high earners could return $26 in revenue.
The Yale Budget Lab projected the IRS could lose $323 billion in tax revenue over the next decade due to reduced audit capacity.
Meanwhile, the Partnership for Public Service estimates DOGE’s savings — reportedly $165 billion — are offset by up to $135 billion in costs from lost productivity, rehiring efforts, and ongoing litigation.
Lawmakers, unions express concern
During a May 20 Senate Finance Committee hearing, Trump’s nominee for IRS Commissioner, former Rep. Billy Long (R-Mo.), declined to directly criticize the staffing cuts but acknowledged customer service shortfalls.
“I don’t think having worse customer service is acceptable,” Long said.
He pledged to protect IRS workers “like family” but stopped short of promising to reverse layoffs.
Democrats, meanwhile, pressed for assurances that essential services like the Taxpayer Advocate Service would not face staffing shortfalls.
Federal employee unions and watchdogs argue the cuts threaten both compliance and public trust. While Trump administration officials claim the changes will modernize and streamline operations, critics say they undermine core agency functions and sidestep legislative oversight.
What happens next?
Judge Illston’s expected preliminary injunction could delay or nullify thousands of planned layoffs, including more than 17,000 remaining IRS positions. The administration has appealed the ruling to higher courts, but for now, the mass layoffs are on hold.
Agencies have paused termination notices, and some workers placed on administrative leave may be reinstated while the legal battle unfolds.
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