The winners and losers in the ‘big beautiful bill’
These are the potential winners and losers from the tax bill, which President Donald Trump has dubbed the ‘big beautiful bill’.
The Trump administration’s 2025 cost-cutting campaign at the IRS was all too successful, according to an internal watchdog report.
As a result, the agency may struggle through the 2026 tax season. And taxpayers may suffer.
The IRS lost 26% of its 102,000-person workforce to layoffs and buyouts this year through early June, amid a larger effort by the Trump administration to shrink the federal government. The figure comes in a June 25 report from Erin Collins, the national taxpayer advocate.
The 2025 tax season ended as “one of the most successful filing seasons in recent memory,” Collins said in a statement that accompanied the report. “But with the IRS workforce reduced by 26%, and significant tax law changes on the horizon, there are risks to next year’s filing season. It is critical that the IRS begin to take steps now to prepare.”
The IRS processed 138 million returns in the 2025 filing season and issued 86 million refunds, with an average refund of $2,942.
Few of the tax agency’s critics predicted a successful 2025 tax season. The IRS went through five commissioners in four months, Collins writes in the report, “and many of its most experienced leaders chose to accept one of the voluntary departure options.”
Tax changes in Trump bill could swamp understaffed IRS
Now comes a bigger challenge. A mammoth legislative package, approved by the Senate on July 1, includes dozens of tax cuts, tax-cut extensions and other tweaks to the tax code.
The tax agency’s Information Technology unit will have to reprogram IRS data systems to reflect those changes, if they become law. But that unit has lost 27% of its staff, Collins reports.
The Taxpayer Services unit will have to handle the predicted deluge of telephone calls from befuddled taxpayers. That unit has lost 22% of its staff, more than 9,000 employees.
To avoid potential chaos, according to a report summary, “the IRS will need to rapidly hire and train thousands of new Taxpayer Services employees before the 2026 filing season to process returns and deliver timely refunds.”
Other taxpayer advocates echoed those concerns.
“You can’t make those kinds of deep cuts without harming customer service,” said David Kass, executive director of the nonprofit Americans for Tax Fairness. “Let’s be clear: This is a mistake of the administration’s own making.”
Taxpayer Advocate: IRS needs fully functional online accounts
Collins made her remarks in a 75-page National Taxpayer Advocate Objectives Report to Congress. The report recommends several agency objectives. Among them:
- Create fully functional IRS online accounts. Right now, taxpayers “generally cannot file tax returns, view most notices, or respond to notices through their online accounts,” according to the report summary. “Until recently, they could not make payments. As a result, only about 10% of taxpayers have taken the time to establish online accounts.”
- Streamline taxpayer case management. Today, the IRS “stores taxpayer data on about 60 distinct case management systems that generally cannot communicate with each other,” according to the report summary. When a taxpayer calls, IRS representatives often search through multiple systems to find their data, while the taxpayer waits on hold.
The Trump administration set out to cut thousands of jobs at the IRS this year, aided by Elon Musk’s Department of Government Efficiency, with an eye to saving money.
Buyouts and layoffs, together, thinned the IRS workforce from 102,113 to 75,702, according to the advocate’s report.
The cuts, alone, would have posed a formidable challenge to the IRS as it ramps up for the 2026 tax season, agency observers say.
But now, with the expected passage of Trump’s tax bill, the smaller staff may have to cope with an onslaught of taxpayer inquiries about new rules on overtime, tips and car-loan interest.
“Now, maybe the cuts to staffing alone may not have had a huge impact on the filing season if all else held equal,” said Alex Muresianu, a senior policy analyst at the nonprofit Tax Foundation. “But having the big staffing cuts the same year as a bunch of major tax changes is a dangerous mix.”
Is Direct File on the way out?
One apparent casualty of the cuts is Direct File, a new IRS program that allowed millions of Americans with uncomplicated taxes to file returns at no cost.
Piloted in a dozen states last year, Direct File expanded to 25 states in 2025. But now, the program may be over. The Trump tax bill would empanel a “task force on the replacement of Direct File.”
Perhaps the Direct File staff knew what was coming. In the first half of 2025, according to the advocate’s report, the unit shrank from 27 employees to five.
