The federal hiring freeze ordered by President Trump adds pressure on the IRS, creating concerns over timely tax return processing and potential delays in refunds.
Quick Takes
- President Trump enacted a federal hiring freeze with certain exemptions, including the IRS, effective for 90 days.
- The IRS expects to receive 140 million individual tax returns this season, requiring careful resource management.
- The IRS is reallocating staff to address the demands of the filing season.
- Taxpayers are encouraged to adjust their financial planning to minimize dependence on potential refunds.
Understanding the Federal Hiring Freeze
The executive order signed by President Donald Trump implemented a 90-day federal hiring freeze, specifically excluding the IRS. Despite this exclusion, the freeze leads the IRS to retract job offers with start dates post-February 8, 2025. This development challenges the IRS’s ability to effectively process the estimated 140 million individual tax returns due this season. With operations strained, controlling tax return processing will depend heavily on reallocating existing personnel.
Melanie Lauridsen of the AICPA acknowledged the potential administrative challenges posed by the hiring freeze. She noted that the IRS intends to reallocate workers to meet the needs of the filing season. This strategy reflects resilience, but questions remain about whether it will suffice amid limited resources and increased workload.
Potential Operational and Oversight Challenges
Former IRS Commissioner Charles Rettig highlighted the significant impact of the hiring freeze on all facets of the IRS’s operations. However, he expressed confidence in the staff’s ability to manage with limited support. The strategic advantage lies in the IRS’s currently larger staff, made possible by funds from the Inflation Reduction Act. This increase in manpower is expected to help the agency function more efficiently during this challenging period.
Aside from internal adjustments, external regulatory and oversight bodies like the AICPA are monitoring the situation. They offer assurances that processes are in place to attempt to curb negative impacts on taxpayer services. However, taxpayers are still advised to take proactive measures to potentially mitigate risk.
Proactive Measures for Taxpayers
Taxpayers can take steps to reduce dependence on refunds during this time. Financial advisors recommend adjusting withholding allowances, paying estimated quarterly taxes, and maximizing retirement contributions. Careful tracking of expenses is also suggested to effectively decrease potential disruptions. The IRS encourages individuals and businesses to act strategically amid uncertainties caused by the redistribution of administrative resources.
“The IRS will function much better today and in the upcoming filing season with this hiring freeze than they would have, say, four years ago.” – Dr. Steven Hamilton
The hiring freeze, in conjunction with recent policy changes affecting remote work, could prompt unexpected retirements among older IRS staff, potentially exacerbating processing delays. Taxpayers and financial professionals must remain vigilant and informed as this situation evolves.
