Highlights:
– The IRS faces a significant reduction in workforce, with about 20,000 employees interested in a deferred resignation offer, potentially shrinking the agency by 20%. This move, part of a federal initiative to cut costs, could have far-reaching implications on IRS operations and services.
– Controversy surrounds the deferred resignation program, as some employees, including high-level officials, accepted the offer, while unions and others voiced concerns about maintaining critical functions, especially during the upcoming tax season. Legal and contractual issues, including challenges from the National Treasury Employees Union, further complicate the situation.
– The workforce reductions coincide with leadership departures and modernization efforts within the IRS. However, critics raise alarms about the potential negative impacts of deep cuts on crucial IRS operations like processing tax returns and issuing refunds, sparking debates about the long-term consequences on federal tax administration and employee morale.
Summary
The Internal Revenue Service (IRS) faced a significant workforce reduction in 2024 as approximately 20,000 employees expressed interest in a deferred resignation offer, part of a broader federal initiative to downsize government agencies and cut costs. This program allows eligible federal employees to voluntarily resign while continuing to receive salary and benefits through a deferred period, typically ending on September 30, thereby incentivizing voluntary departures without immediate vacancies. If fully realized, the buyout could reduce the IRS workforce by about 20%, shrinking an agency that employed over 102,000 workers early in 2024.
The deferred resignation program has been a source of controversy among IRS staff and unions. While some employees, including high-level officials, accepted the offer, many opposed the reductions, citing concerns about the agency’s ability to maintain critical functions during the upcoming tax filing season. Certain essential roles, such as those in Taxpayer Services and Information Technology, were exempted from the program until May 15, 2025, to mitigate service disruptions, but the requirement for some employees to continue working beyond initial promises drew sharp criticism and allegations of “bait-and-switch” tactics by the National Treasury Employees Union (NTEU).
Legal and contractual issues have complicated the program’s implementation. Employees who accept the deferred resignation waive their right to appeal, and agencies retain discretion over work assignments and administrative leave during the deferred period, raising questions about compliance with federal employment laws. Moreover, funding uncertainties beyond March 2025 and ongoing union lawsuits challenge the program’s legality and its potential impact on IRS operations.
The workforce reductions come amid a backdrop of leadership departures, including the IRS Chief Information Officer, and efforts by the Treasury Department to modernize agency processes through technology and efficiency improvements. However, critics warn that deep cuts risk impairing the IRS’s ability to process tax returns, issue refunds, and provide taxpayer assistance during a critical period, fueling debate about the long-term effects on federal tax administration and employee morale.
Background
In 2024, the Internal Revenue Service (IRS) faced significant workforce reductions as part of a broader federal effort to cut costs and downsize the government workforce. This initiative was influenced by the Trump administration and included closing agencies, laying off probationary employees without civil service protections, and offering buyouts to federal employees through a “deferred resignation” program. The program allows employees who accept the buyout to remain on paid administrative leave through September 30, providing an incentive for voluntary departures.
At the start of 2024, the IRS employed approximately 100,000 workers, a number that had grown slightly to over 102,000 during the year. Around 20,000 IRS employees expressed interest in accepting the latest deferred resignation offer, which, if fully realized, would reduce the agency’s workforce by roughly 20%. This potential exodus of workers raised concerns about the IRS’s ability to fulfill critical functions during the tax filing season, such as answering taxpayer questions, processing tax returns, and issuing refunds.
The deferred resignation program has been controversial within the IRS workforce. Many employees voiced strong opposition to the cuts, with some expressing determination to remain on the job despite pressures to leave. The administration’s decision to require employees accepting the buyout to continue working through the peak filing period until May 15, 2025, for specific critical positions, underscores the essential nature of IRS workers to the agency’s mission and the challenges posed by the workforce reduction.
Leadership changes have also accompanied the downsizing efforts. Rajiv Uppal, the IRS Chief Information Officer since January 2024, announced his departure amid the broader leadership exodus spurred by the administration’s cost-cutting plans. The reductions are partly justified by anticipated process improvements and technological innovations aimed at enhancing IRS efficiency and taxpayer service despite a shrinking workforce.
Deferred Resignation Offer
The deferred resignation offer is a voluntary separation program initiated by the federal government aimed at reducing the size of the workforce, including at the Internal Revenue Service (IRS). Under this program, eligible federal employees can choose to resign from their positions while continuing to receive their full salary and benefits for a deferred period before their official separation date.
The first iteration of the program saw approximately 4,700 IRS employees accept the deferred resignation offer, including at least three high-level officials such as acting commissioner Melanie Krause. The deadline for the initial offer was April 14, with employees allowed to depart as early as April 28. This program provided financial incentives and flexibility, encouraging employees, particularly those who are 40 years or older, to carefully consider the offer over a mandatory 45-day period.
The deferred resignation program generally excludes certain positions deemed critical, such as roles in Taxpayer Services, Information Technology, and the Taxpayer Advocate Service, which were granted exemptions until May 15, 2025. Employees in these critical roles who had already accepted the offer were later instructed to return to work, prompting criticism from employee unions about changing terms and the reliability of the program’s conditions.
Eligibility for the deferred resignation offer includes most full-time federal employees, except for military personnel and some exempted positions. Additionally, employees aged 50 or older with at least 20 years of federal service, or those with at least 25 years of service regardless of age, qualify for the Voluntary Early Retirement Authority (VERA) alongside the deferred resignation offer, providing further retirement benefits. Employees with retirement dates between October 1 and December 31, 2025, remain eligible, with their deferred resignation date extended to coincide with their official retirement date.
Upon acceptance, employees may be placed on paid administrative leave, though agencies have the discretion to consolidate or reassign roles and adjust workloads during the deferred period. This administrative leave arrangement has raised legal questions regarding its compliance with federal statutes and the extent to which agencies can manage employee work status during the deferred resignation period.
The deferred resignation program is part of a broader government effort to streamline federal operations through workforce reductions and modernization initiatives. However, the rollout has faced challenges, including shifts in guidance from the Office of Personnel Management (OPM), potential funding uncertainties beyond March 2025, and concerns over the program’s legal and practical implications. Unions have criticized the program for perceived bait-and-switch tactics and the uncertainty it creates for federal employees.
A second and final round of the deferred resignation buyout, dubbed “DRP 2.0,” was announced by the Treasury Department with applications accepted through April 14. This initiative reiterates the administration’s commitment to workforce reduction while providing another opportunity for eligible employees to participate.
Employee Interest and Response
Approximately 20,000 Internal Revenue Service (IRS) employees have expressed interest in accepting the Trump administration’s latest deferred resignation offer, which was introduced as part of a workforce reduction strategy. This buyout, if fully embraced, would reduce the IRS workforce by about 20%, shrinking the agency from over 102,000 employees in 2024 to a significantly smaller size. Employees who accept the offer are placed on paid leave through the end of the current fiscal year, September 30, allowing the agency to manage its staffing levels gradually.
The offer, known as the Deferred Resignation Program (DRP 2.0), was presented as a “second and final” opportunity for employees to voluntarily resign under favorable terms, with applications accepted until April 14. Acceptance methods included an online portal, email, or supervisor notification, after which Treasury’s Human Resources Office verified eligibility and initiated offboarding procedures. The program requires a formal contract, and once accepted, employees waive their right to appeal the resignation, as stipulated by the Office of Personnel Management (OPM). The contract is generally irrevocable except at the discretion of the agency head.
Some employees, particularly those over 40, were given a mandated 45-day consideration period before accepting the offer, providing them additional time to assess their options and plan for the future. High-level officials, including acting IRS commissioner Melanie Krause, were among those who accepted the offer, signaling a broad impact across different agency levels. However, the offer has drawn criticism from union representatives and some employees who question the reliability and fairness of the terms, emphasizing the essential role IRS staff play in tax processing and compliance.
Employees have also been advised to carefully reflect on the decision, especially if their skills may not translate easily to the private sector, as those workers might have stronger grounds to legally challenge reductions in force. Despite the deferred resignation, employees remain on payroll and continue receiving full salary and benefits until the resignation takes effect, although agencies may alter workloads or place employees on administrative leave during this period. The IRS has sought to balance these reductions with operational needs, requiring some who accepted the offer during previous eligibility windows to remain working through critical tax filing deadlines.
Tax Deadline Context
The Internal Revenue Service (IRS) has set a deadline of February 6 for employees to resign under a deferred resignation offer, which would allow them to remain on payroll through September 30. However, certain critical positions, particularly in Taxpayer Services, Information Technology, and the Taxpayer Advocate Service, have been exempted from this program until May 15, 2025, to ensure continuity during the upcoming tax filing season. This exemption is significant because losing key staff during the busy tax season could delay the processing of tax returns and refunds, potentially affecting millions of taxpayers.
The federal tax filing deadline for the 2024 tax year is April 15, 2025, a period during which the IRS typically experiences a high volume of inquiries and filings. Taxpayers eligible for credits such as the Child Tax Credit have been encouraged not to delay filing, as the IRS has mechanisms to adjust returns automatically should Congress modify credit eligibility after returns are filed. The pressure on IRS employees to maintain service levels during this critical time is considerable, with the agency emphasizing the essential nature of frontline staff who handle taxpayer questions, process returns, and issue refunds.
The deferred resignation program has faced criticism and concern from unions and employee groups. The National Treasury Employees Union (NTEU) underscored the importance of IRS employees, stating that requiring them to remain longer than initially promised demonstrates their indispensable role in ensuring that government functions critical to the American public are fulfilled. This program and the broader workforce reductions come amid a backdrop of significant downsizing efforts at the IRS, including layoffs and resignations, which could see the agency lose up to 40% of its workforce by the end of the year.
These workforce changes reflect broader administrative goals to reduce federal spending and improve government efficiency, but they also raise questions about the IRS’s capacity to manage the upcoming filing season effectively. The administration has sought to balance the reversal of previous hiring expansions with maintaining service quality, emphasizing commitments to collections, privacy, and customer service despite the reductions. Nonetheless, experts warn that deep cuts could impair the agency’s ability to generate revenue and provide timely assistance to taxpayers during this pivotal period.
Legal and Contractual Considerations
The deferred resignation offer extended by the Office of Personnel Management (OPM) includes several legal and contractual stipulations that affect federal employees. According to the contract template, once an employee accepts the deferred resignation agreement, the offer generally cannot be rescinded except at the sole discretion of the agency head. Furthermore, employees who accept this arrangement waive their right to appeal the resignation through the Merit Systems Protection Board or any other forum. This waiver raises questions about employees’ ability to challenge the terms or conditions of their resignation once accepted.
While the deferred resignation policy aims to comply with the Administrative Leave Act, there remains uncertainty about whether OPM’s offer provides a valid legal justification for prolonged administrative leave. Employees opting into the program remain on payroll and continue receiving full salary and benefits until their resignation becomes effective, typically through September 30. However, agencies retain discretion to place employees on administrative leave or adjust workloads during this period, with no guaranteed conditions explicitly outlined. Initial reports suggesting inclusion of Voluntary Separation Incentive Payments (VSIPs), or “buyouts,” have been refuted by the absence of such provisions in OPM’s memorandum. Consequently, employees should not expect severance or incentives beyond continued employment through the deferred resignation period.
Additional legal complexities arise from potential government shutdowns, which could affect pay regardless of participation in the deferred resignation program. Nevertheless, employees accepting the offer remain entitled to backpay under the Government Employee Fair Treatment Act of 2019. The program’s availability is limited to those who resign before its closure, although exceptions may be made for employees on approved absences during the open period. Once the deferred resignation agreement is offered, employees have a fixed timeframe within which to sign, further underscoring the binding nature of the contract.
Uncertainty also surrounds funding for agencies implementing the deferred resignation program, as many are funded only through March 14, 2025. This raises questions about the legal authority to continue paying federal employees through September, especially in the event of funding lapses or legal challenges to the program’s terms. Several federal employee unions have filed lawsuits challenging program deadlines and conditions, calling them “unlawful and arbitrary,” and highlighting concerns that critical government functions—particularly at the IRS—may be disrupted if the program proceeds without modification. These ongoing legal disputes underscore the precarious contractual and statutory environment surrounding the deferred resignation offer.
Reactions and Implications
The announcement of the deferred resignation offer (DRP) for IRS employees amid efforts to reduce the federal workforce has generated significant controversy and mixed reactions. Employee unions, such as the National Treasury Employees Union (NTEU), which represents IRS workers, have been particularly critical. NTEU President Doreen Greenwald described the shifting terms of the DRP as a “clear case of bait-and-switch,” highlighting that some employees who initially accepted the offer under the impression they would be paid not to work through September 30 were later instructed to remain on the job longer than promised. This reversal has reinforced the union’s stance that IRS employees are essential, especially during critical periods like tax filing season, and that the agency’s workforce cannot be easily reduced without impacting core operations.
Many IRS employees have expressed strong resistance to the downsizing plans. One worker commented on the situation by emphasizing their determination not to be intimidated into resigning, reflecting widespread morale challenges within the agency. The uncertainty and perceived unreliability of the DRP terms have fueled distrust toward the administration’s workforce reduction efforts. Additionally, the rescinding of job offers and hiring freezes imposed by previous leadership have further complicated staffing issues at the IRS.
From the Treasury Department’s perspective, the planned reductions and adjustments are framed as part of broader process improvements and technological innovations aimed at enhancing efficiency in revenue collection and taxpayer service. A Treasury spokesperson noted that these changes are “currently being considered” to allow the IRS to function more effectively despite a leaner workforce. However, critics argue that significant cuts to “taxpayer services and compliance” personnel during the reduction phases risk undermining the agency’s ability to meet taxpayer needs.
Operationally, the IRS has classified certain roles as “essential” and required some employees who accepted the DRP to continue working through May 15 to support the tax filing season, underscoring the critical nature of their duties such as processing returns and responding to taxpayer inquiries. This requirement has revealed the tension between workforce reduction goals and maintaining uninterrupted government services during peak periods.
The broader implications include potential opportunities for taxpayers to come into compliance through revised Voluntary Disclosure Programs, signaling a nuanced approach amid workforce adjustments. Nevertheless, the agency’s challenges in balancing workforce reductions with service obligations continue to generate debate about the long-term impact on tax administration and federal employment stability.
Related Developments
The future of the IRS workforce has become increasingly uncertain amid significant workforce reductions and organizational changes. The agency is undergoing one of the largest overhauls of federal acquisition policies since the 1990s, accompanied by substantial planned cuts, particularly affecting taxpayer services and compliance employees. These reductions are part of a broader administration effort to decrease the size of the federal workforce through a combination of layoffs, buyouts, and early retirement
The content is provided by Jordan Fields, 9 Minute Read
