2025 at the IRS: 5 Takeaways From the Agency’s First 200 Days Published August 15, 2025
Over 200 days into Trump’s second administration, several changes at the Internal Revenue Service signal an uncertain future for the agency. Here are five key takeaways from the first 6 months that lenders, business owners and taxpayers need to understand to best prepare for the road ahead.
1. Billy Long was the shortest serving IRS commissioner to date.
Billy Long, former U.S. congressman for the state of Missouri, was officially sworn in as the new commissioner of the IRS on June 16th. His appointment ended a seven-month confirmation process, which brought up debate about his past, complicated relationship with the agency. He had previously sponsored legislation that sought to abolish the IRS and worked with a firm that distributed the pandemic-era employee retention tax credit.
Last week however, not even two months after his confirmation, Trump removed Long from the position – making him the shortest serving IRS commissioner confirmed by the Senate in history. The reasons for removal are currently unknown, and Trump has nominated Treasury Secretary Scott Bessent to serve as acting commissioner in his place.
Bessent will be the sixth leader the agency has seen since the start of Trump’s term. The tumultuous commissioner changes are indicative of the extremely chaotic year the IRS has had, and it looks like the agency is still not out of the woods when it comes to navigating new leadership and policy.
2. The IRS has faced major funding cuts and layoffs.
As the Trump administration looks to curb government spending, the IRS has been a primary target.
As a part of the 2024 and 2025 appropriations processes, Congress has scaled back more than $40 billion, over half of the Inflation Reduction Act’s stated funding for the IRS. And in tandem, before President Trump took office, the IRS had roughly 100,000 employees. Since his inauguration and following DOGE policy implementation, the IRS has lost approximately one quarter of its staff this year, with more potential cuts on the way.
3. Collection efforts will likely be impacted.
The process of collecting taxes is changing in real time. The IRS is attempting to do more with less—by leaning into technology and reducing spend on human capital, the goal is to bolster efficiency, but the results will remain uncertain for quite some time.
Historically, reducing overhead at the IRS has weakened tax enforcement and collection, leading to less government revenue. If enforcement declines, high-income taxpayers and some business owners, who often have complex finances and greater opportunities to avoid scrutiny, often face fewer audits. A weakened enforcement environment could lead to accumulating tax liabilities and liens that may remain hidden from lenders and creditors. As unpaid tax obligations pile up without proper collection action, borrowers may develop a false sense of financial security while their actual debt burden grows substantially. These undisclosed tax liabilities can create severe consequences for both borrowers and lenders – particularly when they surface during credit decisions or financial crises.
Since every dollar spent on enforcement recovers several more in unpaid taxes, cutting collection resources often leads to a loss of government revenue. Further, research from the Yale Budget Lab suggests that even modest staff reductions could cost $160 billion in lost audit revenue, while deeper cuts might shrink total tax collections by more than a trillion over a decade. The point is this: recent changes will almost certainly have effects – it’s just too soon to know what those effects will be.
4. Funding cuts have frozen agency modernization efforts.
A year ago, the Inflation Reduction Act’s funding allowed the IRS to begin modernizing its systems and improving taxpayer services – leading to shorter call wait times and the development of programs like the Direct File pilot. The National Taxpayer Advocate reported noticeable improvements in service quality. However, with reduced budget to execute and staff to implement, modernization efforts at the agency are being reconfigured at this very moment.
5. The layoffs won’t stop here.
As performance data for this year’s tax season trickles in, we’ll get a sense of the first real consequences of these cuts: maybe longer wait times, or fewer audits of taxpayers and businesses, and potentially even slower refunds for businesses and taxpayers alike. Additional layoffs are likely, with some reports warning staffing levels will return to their lowest levels in 45 years. This has the potential to have a snowball effect on lenders and borrowers. Less staff and longer wait times could mean increased turnaround times for IRS information to close loans, resulting in a slowdown in capital for borrowers who need it to keep their business going. Combine this with the recent tax shifts in the OBBBA, and it’s a lot of change happening all at once – the recipe for a messy tax season this coming year.
Despite the turmoil and uncertainty surrounding the IRS, Tax Guard remains committed to providing lenders with the tax information they need to make better informed decisions. Regardless of policy changes, we’re here to help navigate uncharted waters together.
