Mass Layoffs at IRS Violated Policy, Treasury Watchdog Says

The inspector general says over 7,000 probationary employees were let go without required notice or performance review, including some in critical roles.

The Internal Revenue Service in Washington on July 21, 2025. Madalina Kilroy/The Epoch Times

The Internal Revenue Service (IRS) violated its own procedures when it terminated more than 7,000 probationary employees this year, including some who performed critical services, Treasury’s inspector general said in a report last week.

The Treasury Inspector General for Tax Administration (TIGTA) stated in a report released on Aug. 14 that the IRS did not follow its internal rules requiring 30-day notice periods and failed to consider individual performance before dismissing 7,315 workers in February and March. Nearly all of those employees were rated “Fully Successful” or better, or had not yet been evaluated, the report said.

“Termination letters cited performance as a reason for termination; however, the IRS did not consider individual performance when deciding which employees to terminate,” TIGTA concluded. The watchdog noted that some employees marked “Outstanding” were told their jobs were being cut.

The watchdog also found that the IRS failed to properly account for mission-critical roles when deciding which probationary employees to spare from termination, and later tried to rehire some workers who had been mistakenly let go.

The layoffs were carried out at the direction of the Treasury Department under the Trump administration’s Department of Government Efficiency (DOGE) initiative, which has sought deep reductions across the federal workforce to eliminate identified wasteful spending and improve efficiency. In total, more than 26,000 IRS employees have left since January, including over 17,500 who accepted buyouts through a deferred resignation program, according to a June report from the National Taxpayer Advocate.

The February terminations immediately drew legal challenges. Federal courts in California and Maryland ordered the IRS to reinstate the employees by March, and the Treasury later directed that all 7,315 be returned to full work status in May. More than half subsequently resigned or took voluntary exit offers, TIGTA said.

IRS officials informed TIGTA that they processed the February-March probationary terminations under guidance from the Office of Personnel Management (OPM) and Treasury direction issued on Jan. 20. They said the language in the termination letters was provided by OPM/Treasury, and IRS was not permitted to make substantive changes.

TIGTA said in the report that the letters went out unsigned because they “inaccurately cited performance as a factor for termination” and no IRS official would sign them. In April, President Donald Trump signed an executive order that streamlined probationary removals, which no longer require agencies to spell out performance inadequacies.

The Epoch Times has reached out to the IRS for comment on the report, which landed as the legal battle over the firings played out in federal court.

On Aug. 19, a 9th U.S. Circuit Court of Appeals panel in San Francisco heard arguments in American Federation of Government Employees v. Office of Personnel Management, the unions’ challenge to the February mass terminations.

Two judges on the panel questioned whether the case belonged in federal court at all.

Circuit Judge Lawrence VanDyke called it “weird” that the unions sued OPM instead of challenging the individual firings at the Merit Systems Protection Board. “There’s a problem here,” he said. “It seems to be circumventing an agency process and it’s doing it by grabbing hold of an agency that never fired anybody.”

Circuit Judge Daniel Bress similarly suggested unions should have pursued the employing agencies directly. “You don’t need OPM to be a defendant or a party in that process in order to be able to achieve that result,” Bress said.

Union attorney Danielle Leonard countered that OPM had unlawfully created a new rule redefining when probationary workers can be fired without the process required by law.

Judge Morgan Christen noted that “the defendants are the employing agencies” in board cases, but said the unions’ claim is that “OPM acted outside its authority.”

The case, which remains unresolved, underscores the unsettled status of thousands of probationary employees across government.

While the Supreme Court in April stayed an earlier order requiring reinstatement, many workers had already been temporarily brought back but placed on administrative leave, or have since left through voluntary exit programs.

Reuters contributed to this report.