{"id":5910,"date":"2026-08-24T17:11:35","date_gmt":"2026-08-24T17:11:35","guid":{"rendered":"https:\/\/crosscountrymovingteams.com\/?p=5910"},"modified":"2026-08-24T17:11:35","modified_gmt":"2026-08-24T17:11:35","slug":"its-hard-to-know-exactly-what-the-objective-of-doge-was-former-irs-boss-warns-elon-musks-cuts-to-the-tax-agency-will-be-felt-in-years-to-come","status":"publish","type":"post","link":"https:\/\/crosscountrymovingteams.com\/?p=5910","title":{"rendered":"\u2018It\u2019s hard to know exactly what the objective of DOGE was\u2019: Former IRS boss warns Elon Musk\u2019s cuts to the tax agency will be felt in years to come"},"content":{"rendered":"
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While the IRS described the 2026 tax season as successful, former acting Commissioner Douglas O\u2019Donnell said DOGE\u2019s extensive cuts will more likely be felt years down the line and made worse by an ever-shrinking agency budget.<\/p>\n

Read more College students are shaving a year off their bachelor\u2019s degrees and saving as much as $20,000. Critics say they\u2019re \u2018cutting corners\u2019<\/a><\/p>\n

\u201cI\u2019ve been very concerned with the ability of the agency to carry out on its mission, whether it\u2019s at the services level or enforcement level, but also just in general to be a functioning federal government agency going forward,\u201d he told Fortune<\/em>.<\/p>\n

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For its part, the IRS said its headcount should be relatively stable, expecting to end 2026 with 74,000 employees, about the same as the end-of-2025 staff level.<\/p>\n

\u201cContrary to claims from critics, the IRS delivered a historic, successful 2026 filing season efficiently processing returns and issuing average refunds that were 11 percent higher than last year as Americans benefited from the President\u2019s Working Families Tax Cuts,\u201d an agency spokesperson told Fortune<\/em> in a statement. \u201cIRS Chief Executive Officer Frank Bisignano remains committed to maintaining the right workforce to deliver the world-class service American taxpayers deserve.\u201d<\/p>\n

O\u2019Donnell\u2019s career at the IRS spanned from 1986 until 2025. He served as acting commissioner from November 2022 to March 2023 and again from January to February 2025, at which point he stepped down from the role. He now serves as the senior managing director in the KPMG Washington National Tax practice.<\/p>\n

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Despite his criticism, O\u2019Donnell wants to be clear: The IRS\u2019s problems did not begin with DOGE nor the Trump administration. Before the staff cuts, the agency had lagged behind other countries for years on modernization that would\u2019ve produced savings, he said.\u00a0<\/p>\n

For example, the IRS has tried to go paperless for nearly four decades, because paper tax returns make up just 6% of all returns but 72% of processing costs, according to a February from the Treasury Inspector General for Tax Administration. The IRS plans to reduce the expense of paper processes from $450 million to less than $20 million by 2029. Still, previous plans often sputtered.<\/p>\n

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\u201cIt was clear that there had been underinvestment for a number of years across multiple administrations,\u201d O\u2019Donnell said. \u201cSo it\u2019s not pointing any fingers here.\u201d\u00a0<\/p>\n

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The 2022 Inflation Reduction Act included a strategic plan to transform the IRS into a \u201cmodern tax administration\u201d with an $80 billion infusion. The IRS was to modernize its technology and securely increase employee and taxpayer access to data, as well as hire and retain more high-skilled workers through recruitment campaigning, and offer more flexible work opportunities.<\/p>\n

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But after the DOGE cuts that began in February of last year with the first wave of personnel reductions, progress didn\u2019t just stall, O\u2019Donnell said, it reversed.<\/p>\n

In a testimony before the Senate Finance Committee in April, however, Bisignano\u00a0said the IRS has already made efficiency gains.<\/p>\n

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\u201cWe have successfully cut $2 billion from the IRS information technology budget without any operational disruptions,\u201d he said. \u201cWe achieved these cost savings by renegotiating, scaling back, and in some cases eliminating, wasteful IT and professional services contracts.\u201d<\/p>\n

Read more America\u2019s energy sector will need 500,000 more workers by 2030 thanks to AI\u2014but unless more workers retrain, humanoid robots will have to step in<\/a><\/p>\n

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What was unclear to O\u2019Donnell was what DOGE had originally intended when it made those cuts: \u201cIt\u2019s hard to know exactly what the objective of DOGE was. I\u2019ll just say that. I\u2019m not completely sure because there\u2019s really no strategic document that\u2019s out there. The focus seemed to be cutting in the enforcement space and the technology space, but maintaining the service levels as much as possible,\u201d he said.<\/p>\n

The IRS has long tried to use technology to bolster those services and eventually reduce the size of the workforce. But O\u2019Donnell argued that decadeslong goal was actually hurt at first by having fewer workers. <\/p>\n

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Just like in any sector being potentially transformed by AI, automation initially increases demand for labor, both because human workers need to smooth out kinks associated with adopting new technologies, and because it can lead to greater productivity and expansion of operations.<\/p>\n

\u201cIf you\u2019re going to improve services through digital means, you\u2019re going to need to have a bit of a bump in the budget to be able to invest in the systems and the digital capabilities, and at some point, then you can reduce the number of people,\u201d O\u2019Donnell said. \u201cThe loss of people\u2026that\u2019s not the worst thing in the world, so long as there\u2019s a replacement. The concern was that there was not a replacement, at least not an immediate one, that could step in and provide the level of service.\u201d<\/p>\n

The IRS managed to maintain its services this year, but that trend may not continue. At risk from these reductions is the peace of mind that taxpayers are indeed filing their taxes correctly every year as systems become more strained, O\u2019Donnell noted. Nobody likes an audit, but some oversight of activity creates confidence in the tax administration system.<\/p>\n

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\u201cIn the large corporate space, just over time, losing employees, you just basically reduce what you can get to, and you cover less of it,\u201d he said. \u201cOver time, that diminishes the ability of leaders in the IRS to have confidence that taxpayers are complying because you\u2019re not getting to a large enough number of them to be sure about that.\u201d<\/p>\n

At first glance, the challenges the IRS faces are likely to grow. The IRS\u2019s annual discretionary budget for fiscal 2025 was $12.2 billion, a total that fell to $11.2 billion for fiscal 2026, and which is poised to drop even more to $9.8 billion for fiscal 2027. It would mean a reduction in enforcement operations, as well as the scrapping of the Direct File program, a 2024 effort that allowed Americans to file their federal income taxes directly to the IRS for free.<\/p>\n

Not all hope is lost, though. IRS leadership under Bisignano will likely meet with the Treasury Department and with the Office of Management and Budget to negotiate for additional funding, or at the very least discuss what is possible to complete with different levels of funding. It\u2019s also not unheard of for congressional appropriations staff to consult with the IRS about their needs.\u00a0<\/p>\n

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But the IRS\u2019s future challenges involve not just making technological improvement and regrowing its workforce, reportedly through hiring 8,000 new employees. It\u2019s that the agency will have to keep up with the rapidly advancing world of AI to find tools both affordable, effective, and secure if it wants to technologically advance, O\u2019Donnell explained.<\/p>\n

\u201cIf the objective of the IRS is to be able to improve service to taxpayers, 24\/7, 365, you\u2019re going to need to have systems availability to do that, and in order to have the systems, you have to\u00a0 build them, and then you have to maintain them,\u201d he said. \u201cAnd I don\u2019t know how that happens in an environment where you\u2019ve got reduced budgetary support to perform those actions to take those steps.\u201d<\/p>\n

Read more Trump ripped Obama for flying long distances to play golf. Now he\u2019s flying to the Irish Open<\/a><\/p>\n

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