The IRS is bracing for a $500 billion drop in revenue as an increasing number of taxpayers could skip submitting their filings in the wake of Department of Government Efficiency layoffs, according to a report.
Taxpayer behavior has changed since President Donald Trump took office and implemented sweeping federal cuts through Elon Musk’s DOGE. As a result, the IRS has “noticed an uptick of online chatter from individuals declaring their intention to not pay taxes this year,” the Washington Post reports, citing three people with knowledge of tax projections.
It added that individuals were “wagering that auditors will not examine their accounts” amid DOGE’s plans to downsize the IRS by nearly 20 percent by May 15.
New hires in taxpayer services and enforcement divisions have been targeted and the agency has dropped investigations of high-value corporations and taxpayers, according to the newspaper. The agency employs roughly 90,000 workers total across the U.S., according to the IRS data.
Treasury Department and IRS officials are predicting a decrease of more than 10 percent in tax receipts by the April 15 deadline in comparison to 2024 filings, which would amount to more than $500 billion in lost revenue, according to the Post. The newspaper said it spoke with officials who shared nonpublic IRS data.
To put the $500 billion in context, the U.S. military budget was about $820 billion last year.
The Independent has contacted the Treasury Department for comment.
IRS officials reportedly tried to warn the incoming Trump administration about DOGE’s planned staffing cuts in January. “Aggressive reductions to budget and personnel capacity risk backlogs, delays, reduced receipts, and diminished capacity to build next generation digital capabilities,” a presentation seen by the Post given by tax officials to Trump’s incoming Treasury Department team said.
Experts warned against reducing the IRS workforce earlier this month. Former IRS commissioners said it would render the IRS “dysfunctional” in an op-ed for the New York Times.
“Aggressive reductions in the I.R.S.’s resources will only render our government less effective and less efficient in collecting the taxes Congress has imposed,” the former IRS commissioners said.
There could be other factors at play contributing to the possible drop in revenue, including the Los Angeles wildfires. Taxpayers in wealthy areas affected by the fires could postpone filing until October, Timur Taluy, CEO of tax-prep service FileYourTaxes.com, told the Post. Some taxpayers may also opt for a penalty-free six-month filing extension during times of economic uncertainty.
Neither of these account for the $500 billion drop in revenue, however, experts told the newspaper.
