IRS budget request cuts 20% of employees in 2026, increases phone help

The IRS budget would decline 37% from fiscal year 2025 to fiscal year 2026 and the number of IRS employees would decrease 20% over the same period, according to the annual Congressional Budget Justification released by Treasury.

The number of employees would drop to 77,728 in fiscal year 2026, compared with 96,700 in the operating plan for fiscal year 2025, Treasury said in the report, released May 30. The last time the number of IRS workers fell below 80,000 was before the COVID-19 pandemic, when about 74,000 worked for the agency in 2019.

The report proposed a total budget of $14.2 billion for fiscal year 2026, down from $22.5 billion in the current-year operating plan. Much of that decrease is attributed to budgeting $2.2 billion from the Inflation Reduction Act, P.L. 117-169, in fiscal year 2026, compared with $9.3 billion in the fiscal year 2025 operating plan.

The report assumes that almost $59 billion of the $80 billion that the Inflation Reduction Act budgeted for the IRS will be rescinded.

The number of employees in technology and operations support, previously called operations support, would decline by 59%, dropping to 4,250 from 10,371. Enforcement employees would drop 31%, going to 22,303 from 32,350.

Employees in taxpayer services, however, would increase by 48%, to 34,044 from 23,001, through a proposed addition of 11,158 full-time employees to answer phones. Still, the level of service (LOS) during the 2026 filing season is predicted to be 85%, slightly lower than the 87% recorded for the 2025 filing season (FS), Treasury said.

“Funding this investment below the requested level will significantly reduce telephone LOS and impair taxpayer services,” the report said. “Without this investment, the LOS would plummet to only 11% for FY 2026 and 16% for the 2026 FS. At this level of service, most taxpayers would be unable to reach the IRS by phone or receive answers to questions related to tax compliance. Taxpayers that do get through would face long wait times.”

It’s not clear whether the report counts IRS employees who have left the agency this year in its 20% figure. The Treasury Inspector General for Tax Administration (TIGTA) said in a report issued in May that the IRS lost 11% of its staff, or over 11,000 people, through voluntary separations and terminations in the first three months of 2025.

The IRS approved thousands more employees for voluntary separations after the period that the report covers, TIGTA said.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.