The Internal Revenue Service (IRS) has experienced significant leadership transitions and operational shifts over the past three years, including recent workforce adjustments under the current administration. Danny Werfel took over as IRS Commissioner in April 2023, replacing Charles Rettig, who completed his term after overseeing the agency through unprecedented pandemic relief efforts.

During Rettig’s tenure, the IRS distributed over $1.5 trillion in pandemic relief, including more than 500 million Economic Impact Payments totaling over $830 billion. The agency also processed over 15 million individual paper returns in fiscal year 2021, dealing with significantly higher error rates as taxpayers struggled to reconcile stimulus payments and unemployment compensation exclusions.

The Inflation Reduction Act of 2022 allocated approximately $79.6 billion to the IRS over 10 years for enforcement, taxpayer service, and technology modernization. Treasury Secretary Janet L. Yellen formally directed that audit rates would not increase for households earning under $400,000 annually, with enforcement resources focused on high-income individuals, large corporations, and complex partnerships.

“Any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small businesses or households below the $400,000 threshold that are audited relative to historical levels,” Yellen stated in her August 10, 2022 directive.

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Digital Transformation and Strategic Initiatives

Under Commissioner Werfel’s leadership, the IRS has prioritized digital transformation and modernization efforts. Key initiatives include the release of the IRS Strategic Operating Plan (April 2023) and the Paperless Processing Initiative (August 2023) aimed at digitizing all paper-filed returns by 2025.

Werfel outlined the agency’s modernization vision in a March 25, 2024 speech titled “Transforming for a Digital World,” describing how technology upgrades would improve taxpayer service and streamline operations. These initiatives mark a broad modernization effort rather than an abrupt transformation, emphasizing data analytics, automation, and real-time processing.

The IRS has also expanded its enforcement capabilities, developing comprehensive strategies to combat abusive tax avoidance transactions, including syndicated conservation easements and micro-captive insurance arrangements. It established an Office of Fraud Enforcement and an Office of Promoter Investigations and began expanding the use of artificial intelligence to support case selection and audit analytics.

Workforce Changes and Filing Season Impact

In February 2025, the current administration announced workforce adjustments at the IRS, according to reporting from The Washington Post. Former Commissioner Charles Rettig stated these actions involved probationary employees primarily within the Small Business/Self-Employed Division, not the Wage and Investment Division that handles taxpayer services.

“There should not be a significant impact on current filing season operations,” Rettig noted regarding the workforce changes. The adjustments affected newer employees rather than experienced personnel responsible for processing individual tax returns and assisting taxpayers.

The IRS stated that ongoing enforcement efforts remain focused on complex tax arrangements and high-income individuals, consistent with Treasury’s audit threshold directive. The agency’s commitment to maintaining audit rates for households under $400,000 continues under current policy, while enforcement initiatives target abusive tax avoidance schemes and emerging compliance risks.

The IRS modernization and workforce initiatives reflect an ongoing multiyear transformation effort, with implications for how taxpayers engage with the agency and how enforcement resources are prioritized.

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