Major changes are underway at the Internal Revenue Service (IRS), and they’re already beginning to affect millions of Americans. In 2025, widespread IRS layoffs and budget cuts are not just headlines, they’re having real consequences on how the IRS operates and how efficiently it can serve the public.
When you wait weeks for a refund, can’t reach anyone by phone, or face a confusing IRS notice, the delays and gaps you experience are only getting worse.
At Scout Tax, we make it our mission to help you navigate this shifting tax environment with clarity, confidence, and protection. Whether you’re a self-employed professional, a small business owner, or someone filing their individual return, understanding what’s happening at the IRS and how to respond is more important than ever.
What’s Happening Inside the IRS?
After a brief period of hiring and modernization efforts funded by the Inflation Reduction Act (IRA), the IRS is now reversing course. Federal funding reductions are triggering agency-wide changes, most notably in workforce numbers and service capacity.
In one of the most significant developments tied to IRS layoffs and budget cuts, more than 3,500 employees in the Small Business/Self-Employed (SB/SE) division are being laid off this year, as revealed in an internal memo from SB/SE Commissioner Lia Colbert and four other managers. The memo, which urged managers to provide support to affected employees, highlights the scale and emotional impact of the downsizing effort.
Beyond this, a new report from the Treasury Inspector General for Tax Administration (TIGTA), Report No. 2025-IE-R017, offers additional insight. The watchdog reviewed how the IRS is implementing reductions through a mix of layoffs, deferred resignations, and hiring freezes, citing that more cuts are expected now that the primary tax season has concluded. While TIGTA didn’t independently validate the data, the report reflects a concerning pattern: a shrinking IRS workforce during one of the most complex tax environments in recent history.
How IRS Changes Affect Individual Taxpayers
These staffing changes and budget constraints have direct implications for individuals and businesses, especially those who rely on timely responses and support from the IRS.
1. Delays Across the Board
Due to reduced processing staff, individuals may experience:
- Slower refunds, particularly for paper-filed or amended returns
- Delays in responding to correspondence or requests for identity verification
- Backlogs in tax adjustments or issue resolution
In practical terms, something that used to take weeks may now take months with minimal communication or updates from the agency.
2. Less Access to Human Help
With phone lines under strain and in-person IRS assistance centers operating with fewer staff and limited hours, getting answers may be more difficult. Online self-service tools are still available, but many complex issues require professional insight to interpret IRS language and determine next steps.
3. Reduced Audits, But Higher Responsibility
While audit rates may decrease temporarily, especially among low- and middle-income taxpayers, the burden of accuracy still falls on the taxpayer. If your return is incorrect or missing documentation, it can still trigger delays, penalties, or further inquiries. And with fewer agents, resolution timelines could stretch even longer.
Key Impacts on Small Businesses
Small business owners are among the most impacted by this IRS shift, especially those managing employment taxes, credits, or ongoing IRS communications.
1. Delays in Processing Business Credits and Claims
Expect longer turnaround times for:
- Employment-related tax credits, including the Employee Retention Credit (ERC)
- Overpayment claims and refund requests
- Responses to IRS letters, notices, or adjustments
For businesses relying on tax refunds or credit processing for cash flow, these delays can impact day-to-day operations.
2. Backlogs in Audits and Appeals
Fewer agents mean fewer field audits being initiated, but also mean those already underway may take longer to complete. Businesses under review may face extended waiting periods before receiving clarification or resolution. The appeals process, which is already notoriously slow, could become even more gridlocked.
3. Rise in Automated Correspondence
To compensate for staff shortages, the IRS is increasing its reliance on automated systems. This means more computer-generated notices are being sent, often with little context or clear direction. These letters can be vague, confusing, and sometimes even inaccurate, requiring careful interpretation and timely response to avoid compounding the issue.
How Scout Tax Helps You Stay Protected
As the IRS downsizes, the need for expert guidance is growing. At Scout Tax, we’re not just watching these developments, we’re preparing our clients to manage them effectively.
Gil Pocker is an Enrolled Agent (EA), a federally licensed tax practitioner recognized by the U.S. Department of the Treasury. Enrolled Agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means Gil can represent any taxpayer, handle all types of tax matters, and appear before any IRS office without restriction. Whether you’re navigating an audit, resolving back taxes, or planning proactively for your financial future, Gil has the authority and expertise to represent you with confidence and precision.
Here’s how we’re stepping in to help more:
✔ Direct IRS Liaison Support
No more waiting on hold for hours. We handle direct communication with the IRS on your behalf, saving you time and reducing stress. Our team knows the protocols, the language, and the urgency required to get issues resolved.
✔ Fast, Accurate Notice Handling
When you receive a notice, we act fast. Whether it’s automated or manually issued, we interpret it, verify its accuracy, and craft an appropriate response, tracking it through to resolution.
✔ Proactive Filing and Documentation
In this environment, accuracy is everything. We ensure your returns are filed correctly, supported by documentation, and submitted early when possible to reduce the risk of delay or errors.
✔ Audit Readiness and Representation
Even with audit activity scaling back, businesses and individuals still face occasional reviews. We ensure you’re audit-ready year-round, with organized records, clear documentation, and direct representation if the need arises.
Why It Matters More Than Ever
The truth is this: IRS layoffs and budget cuts don’t mean fewer tax responsibilities. A smaller IRS means longer waits, more system errors, and less clarity, at a time when compliance and accurate filings are as important as ever
Whether you’re trying to claim a credit, respond to a notice, or just get your tax return processed smoothly, the environment in 2025 is more complex and more unpredictable than in years past.
That’s why working with an experienced team isn’t a luxury, it’s a necessity.
Let’s Stay Ahead Together
This isn’t just a “wait and see” moment. IRS systems are slowing down, and taxpayers need to be more proactive, more accurate, and more strategic than ever before.
At Scout Tax, we’re here to help you do exactly that. We stay updated on every development, adapt our strategies in real-time, and stand by your side every step of the way from filing to resolution.
Get ahead of the 2025 tax season today!
