IRS lost 40% of IT staff in largest reorganization in 20 years

IRS tech staff cut by 40 percent

The Internal Revenue Service has lost 40 percent of its IT staff and 80 percent of its tech leadership over the past year. The agency's Chief Information Officer, Kaschit Pandya, revealed the scale of the cuts during a panel at the Association of Government Accountants on Wednesday.

Pandya described the reorganization as the largest in two decades for the IRS. The cuts are part of a broader workforce reduction across the federal bureaucracy initiated by the Trump administration last year.

Reorganization targets siloed structure

The IRS's overall workforce shrank by a quarter in 2025. Its technology team, however, was hit disproportionately hard. The team started the year with approximately 8,500 employees.

Pandya stated the deep cuts presented an opportunity to break up long-standing operational silos. "Everyone was operating in their own department or area," he said. The goal is to create a unified team focused on a common "scorecard" of outcomes.

Where did the tech staff go?

The exact disposition of all lost staff is unclear. A report from the U.S. Treasury Inspector General for Tax Administration shows the IT department had 8,504 workers in October 2024 and 7,135 a year later.

However, reports indicate that as part of the reshuffle, 1,000 technologists were reassigned to support frontline services during the recent tax season. According to Federal News Network, some of those employees have questioned the logic and execution of this move.

Pandya acknowledged the reorganization has not yet yielded better results. "What it didn't lead to is automatically everybody coming together and working as one team. We just had different silos," he said.

New focus on project-based teams

To address this, the IT department is now establishing cross-functional teams. These teams are designed to handle individual projects from start to finish.

"This way there isn't a cold hand-off of, 'My job is X, and now I'm handing it off to somebody else,'" Pandya explained. The intent is to improve accountability and end-to-end delivery.

Pandya also highlighted that artificial intelligence is expected to play a major role in the future. He positioned AI as a tool to make employees more effective and user-focused, not as a replacement.

IRS leaders are explicitly telling staff that AI will not endanger their jobs. The agency has, of course, already demonstrated a significant capacity for workforce reduction through traditional means.

Digitization efforts fall behind

The deep cuts are having tangible consequences for the agency's modernization goals. Last month, the Treasury Inspector General warned the IRS is behind in its critical effort to digitize paper tax returns.

The watchdog's report directly linked staffing losses to operational risks. It noted the IT function lost about 16 percent of the staff responsible for crucial updates, including those for inflation adjustments and new tax laws.

This shortage means "implementation of these legislative changes is at risk for the 2026 Filing Season," the report concluded. The IRS now faces the challenge of delivering a complex tax season with a radically diminished and reorganized technology workforce.