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The Effect of IRS Layoffs

The Effect of IRS Layoffs

The Effect of IRS Layoffs

The Effect of IRS Layoffs
The Effect of IRS Layoffs

The Trump administration is reported to have plans to eliminate up to 50% of the Internal Revenue Service (IRS) workforce. The IRS had about 100,000 workers when Donald Trump became president, meaning up to 50,000 employees are set to lose their jobs. The first round of layoffs of 7000 employees has been reversed by the courts, but a permanent reduction in the workforce is a real possibility. 

The predicted consequences of these IRS layoffs include:

1. Delayed Tax Processing and Refunds

With a reduced workforce, the IRS may experience longer processing times for tax returns and issuing refunds, especially during peak tax seasons. This could lead to taxpayer dissatisfaction and financial inconveniences. 

2. Reduced Enforcement and Increased Tax Evasion

The layoffs are expected to affect the IRS's enforcement capabilities, particularly in auditing corporate and high-net-worth individuals. This reduction in oversight could result in increased tax evasion and a widening tax gap, the difference between taxes owed and taxes collected. 

3. Diminished Customer Service

Fewer IRS employees could lead to longer waiting times for taxpayer help via phone or in-person consultations, making it more challenging for individuals and businesses to resolve tax-related issues promptly. 

4. Challenges in Implementing New Technologies

The IRS is re-evaluating its modernization efforts, including integrating artificial intelligence technologies. A reduced workforce will hinder the agency's ability to effectively implement and manage these technological advancements, potentially affecting future efficiency gains.

Recommendations for taxpayers in response to the IRS layoffs

Individual taxpayers should not use these layoffs as an opportunity to avoid reporting income on tax returns filed with the IRS. Tax evasion is still illegal. In addition, although the risk of being audited may be reduced, the penalties for not filing a correct tax return and paying the IRS on time can still prove large.

Although many taxpayers look forward to getting refunds when they file their tax returns, the prospect of delayed tax processing might require a new filing strategy. Taxpayers should consider checking their income and tax withholding throughout the year and plan to have a small balance due reported on their April 15 tax returns. The IRS has published guidelines for avoiding penalties on balance-due payments listed below.

For further reading, see:

https://www.thetaxadviser.com/news/2025/mar/7000-irs-workers-reinstated-but-not-yet-returning-to-work/

https://budgetlab.yale.edu/research/revenue-and-distributional-effects-irs-funding

https://www.brookings.edu/articles/a-hamstrung-irs-is-a-gift-to-rich-tax-cheats-and-a-headache-for-honest-taxpayers/

https://time.com/7262942/irs-layoffs-tax-season/

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(844) 621-0630
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Fulcrum Wealth Advisors, LLC (“FWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not imply a certain level of skill or training.

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Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(844) 621-0630
info@fulcrumwa.com

Fulcrum Wealth Advisors, LLC (“FWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not imply a certain level of skill or training.

This website is provided for informational and educational purposes only and is intended to provide general information about FWA, its services, and investment-related topics. Nothing contained on this website constitutes investment advice, nor should it be construed as a recommendation, solicitation, or offer to buy or sell any security or investment product. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Investment advisory services are provided only pursuant to a written investment advisory agreement entered into between FWA and its clients.

Jurisdictional Limitations: FWA provides investment advisory services only in jurisdictions where it is appropriately registered, exempt, or excluded from registration requirements. The information on this website is not directed to, or intended for use by, any person in any jurisdiction where such use would be contrary to applicable laws or regulations.

Any subsequent, direct communication by FWA with a prospective client shall be conducted by a representative who is either registered or qualifies for an exemption or exclusion in the jurisdiction where the prospective client resides.

No Personalized Advice: The information presented on this website is general in nature and does not take into account the individual financial circumstances, investment objectives, or risk tolerance of any specific person. Visitors to this website should not rely on any information herein as a substitute for personalized advice from FWA or from their own financial, tax, or legal professionals.

Testimonials, Endorsements & Third-Party Ratings: This website may include testimonials, endorsements, or third-party ratings. Such testimonials or endorsements are not representative of all clients, and no assurance is given that a current or prospective client will experience the same or similar results.

Where applicable, material conflicts of interest and whether compensation was provided in connection with a testimonial or endorsement are disclosed in accordance with applicable SEC regulations. Testimonials, endorsements, and ratings are not a guarantee of future performance or success.

Tax and Legal Disclaimer: FWA does not provide tax or legal advice. Information on this website should not be construed as tax or legal advice. You are encouraged to consult with qualified tax and legal professionals regarding your specific situation.

Third-Party Links: This website may contain links to third-party websites for convenience or informational purposes. We review the links when they are added and periodically thereafter and have a reasonable basis for believing they convey accurate information relevant to our clients. FWA does not control or assume responsibility for the content, ongoing accuracy, security, or privacy practices of any third-party websites. Accessing such links is at your own risk, and you are not required to link to any information we make available on our website.

© 2026 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(844) 621-0630
info@fulcrumwa.com

Fulcrum Wealth Advisors, LLC (“FWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not imply a certain level of skill or training.

This website is provided for informational and educational purposes only and is intended to provide general information about FWA, its services, and investment-related topics. Nothing contained on this website constitutes investment advice, nor should it be construed as a recommendation, solicitation, or offer to buy or sell any security or investment product. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Investment advisory services are provided only pursuant to a written investment advisory agreement entered into between FWA and its clients.

Jurisdictional Limitations: FWA provides investment advisory services only in jurisdictions where it is appropriately registered, exempt, or excluded from registration requirements. The information on this website is not directed to, or intended for use by, any person in any jurisdiction where such use would be contrary to applicable laws or regulations.

Any subsequent, direct communication by FWA with a prospective client shall be conducted by a representative who is either registered or qualifies for an exemption or exclusion in the jurisdiction where the prospective client resides.

No Personalized Advice: The information presented on this website is general in nature and does not take into account the individual financial circumstances, investment objectives, or risk tolerance of any specific person. Visitors to this website should not rely on any information herein as a substitute for personalized advice from FWA or from their own financial, tax, or legal professionals.

Testimonials, Endorsements & Third-Party Ratings: This website may include testimonials, endorsements, or third-party ratings. Such testimonials or endorsements are not representative of all clients, and no assurance is given that a current or prospective client will experience the same or similar results.

Where applicable, material conflicts of interest and whether compensation was provided in connection with a testimonial or endorsement are disclosed in accordance with applicable SEC regulations. Testimonials, endorsements, and ratings are not a guarantee of future performance or success.

Tax and Legal Disclaimer: FWA does not provide tax or legal advice. Information on this website should not be construed as tax or legal advice. You are encouraged to consult with qualified tax and legal professionals regarding your specific situation.

Third-Party Links: This website may contain links to third-party websites for convenience or informational purposes. We review the links when they are added and periodically thereafter and have a reasonable basis for believing they convey accurate information relevant to our clients. FWA does not control or assume responsibility for the content, ongoing accuracy, security, or privacy practices of any third-party websites. Accessing such links is at your own risk, and you are not required to link to any information we make available on our website.

© 2026 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct