IRS’ Core Mission in Doubt as Trump Policies Push Leaders Out

A top lawyer to the IRS commissioner warned agency leaders the email terminating probationary employees was “false” and threatened to notify the independent watchdog office. The head of HR also questioned it.

Despite these alarms, the IRS sent the February notice to thousands of workers firing them citing performance, setting off a court battle, a review from the Treasury Inspector General for Tax Administration, and the exit of the leaders who objected.

Traci DiMartini, the human capital officer, was put on administrative leave; Joe Rillotta, the commissioner’s counselor, took a deferred resignation plan; and acting commissioner Doug O’Donnell announced his retirement and left the week after the letter went out. The letter went out unsigned.

Roughly half of the IRS’s top leaders have left since President Donald Trump took office. The agency is now on its fifth commissioner since January, Michael Faulkender, who’s also deputy Treasury secretary. The reasons vary, and not all left because of the new administration.

But a common theme connects many: decisions by the Trump administration, guided in part by billionaire Elon Musk’s advisers, to stretch the boundaries of the law as it seeks to shrink the government and punish perceived enemies.

The departures—combined with broader workforce cuts—erode an important layer of defense to the IRS’ most important missions: taxpayer data security and a fair tax system, according to over a dozen former and current agency officials who spoke to Bloomberg Tax.

Many veteran career employees remain, but those left may be less willing to speak up or be less likely to seek leadership roles, said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center who previously worked for the Congressional Budget Office and Treasury Department.

“The fear factor trickles down,” Holtzblatt said.

Some veterans of the first Trump administration said the agency can lean more heavily on technology as IRS staffing levels return to where they had been over the last decade.

But replacing them with political allies or those without the right training leaves taxpayers more vulnerable to scams and the whims of political agendas, former agency workers said. It could also discourage taxpayers from filing returns, leading to billions in less revenue for the federal government.

Interactive graphic: Multiple, top-level IRS officials have left the agency since the Trump administration started.

“People need to have faith in the tax system that their information is going to be kept safe in order to feel comfortable reporting accurately,” said Barry Johnson, who retired from his position of chief data and analytics officer at the IRS in January, on “Talking Tax,” the podcast from Bloomberg Tax.

The IRS declined to comment for this story, and the Treasury Department didn’t respond to requests for comment.

Iced Out

As circles at the top of the IRS get more narrow, former officials worry the agency will be more easily manipulated by the Trump administration.

For career IRS employees not among the roughly 20,000 workers who signaled they want to resign, the consequences of defying the administration are clear: Multiple senior leaders who recently left the agency after speaking up against the Trump administration and the DOGE agenda told Bloomberg Tax they had been cut out of meetings.

Others were put on administrative leave or demoted.

William Paul was removed from the acting top lawyer spot after being viewed as uncooperative by Musk’s Department of Government Efficiency team. He was replaced by Andrew De Mello, a Trump ally and mid-level employee in the Office of Chief Counsel.

Paul’s removal alarmed other chief counsel employees. De Mello stopped including deputies and associates in discussions and projects they were previously a part of, according to two people familiar with the matter. He also jumped multiple seniority levels to take the position, worrying executives in the office about his ability to lead.

DiMartini’s administrative leave started after she didn’t onboard a DOGE employee over a weekend. She said in a court filing that she and then-acting commissioner O’Donnell refused to sign the letter firing probationary employees.

“In all my decades of human resource management for the federal government, I had never before received a directive such as this one,” DiMartini said.

Rillotta also pushed back, according to an email chain seen by Bloomberg Tax.

“I’m compelled to tell you that this letter contains a false statement,” as no one took into account any of the probationary employees’ performance, Rillotta said in the email. “Strike that clause or I’m going to TIGTA,” he said, referring to the Treasury Inspector General for Tax Administration.

Threats to Tax-Exempt Status

The Trump administration is bucking the decades-long tradition to keep the IRS as apolitical as possible, former Treasury and IRS officials said. Trump has threatened to yank the tax-exempt status of Harvard University and has hinted at taking aim at a wider range of groups.

“The administration is probably hunting for people to put into leadership positions who will respond positively to, in effect, pursuing the ‘enemies’,” said John Koskinen, who was appointed to lead the IRS by former President Barack Obama. “It’s very dangerous.”

Loosening IRS access to data is one of the first steps toward weaponizing the IRS, Koskinen said. And if taxpayers don’t trust that their data is safe, fewer people might file their taxes.

Broader access to taxpayer data could also lead to more leaks, former officials said, risking a rise of identity theft and other scams.

“If there’s a religion at the IRS, it’s 6103,” the statute protecting taxpayer confidentiality, said Terry Lemons, a former IRS communications liaison who retired in February after 26 years with the agency.

The IRS heavily restricts who can access taxpayer data, both inside and outside the agency, using firewalls, around-the-clock monitoring, and other measures. IRS employees found to have committed an unauthorized disclosure of taxpayer information face possible imprisonment.

Looking for Immigrants

For over five weeks, top leaders at the IRS pushed back against an unusual request from the Department of Homeland Security: Give us the information you have on people we believe are suspected illegal immigrants.

The request shocked senior leaders and lawyers at the agency. Ultimately, the requests ended in an agreement between DHS and the Treasury Department saying the IRS will give taxpayer data about immigrants to US authorities conducting criminal investigations.

Melanie Krause, then acting IRS commissioner, and Chief Privacy Officer Kathleen Walters said on April 8, the same day the deal went public, that they planned to leave the agency. Senior leaders were circumvented in the final stages of the pact, according to two people familiar with the matter.

Krause told others she didn’t feel she was in a position where she could impact the decision-making at the IRS, a person familiar with the matter said.

Yale University’s Budget Lab, which is led by a former Biden administration appointee, recently estimated the DHS deal would reduce tax revenue by $313 billion over the next decade because undocumented immigrants fearing deportation won’t file. Undocumented immigrants are historically encouraged to pay taxes using individual taxpayer identification numbers.

US tax compliance is among the highest in the world, in part because taxpayers feel comfortable sharing personal information, such as home addresses, income, and Social Security numbers with the IRS, said Rochelle Hodes, principal at Crowe LLP who previously worked at the IRS and Treasury.

The Next Slate of Leaders

The primary line of defense for the functioning of the IRS is at the division-commissioner level, leading the Large Business and International, Tax Exempt and Government Entities, and the Small Business and Self-Employed divisions, said David Kautter, the top tax policy official at Treasury during the first Trump administration, now a partner at RSM.

“If you start to get departures there, then you start to run a greater risk that the dam starts to break,” Kautter said. “The response to that would be, if they’ve got good deputies under them, they can step in and fill the breach.”

So far, the division heads mostly remain in their roles, though Edward Killen, who led the tax-exempt division, is serving as acting taxpayer compliance officer after Heather Maloy left.

The IRS was once lauded for its executive training program across the federal government, Koskinen said. But with a quarter of the agency on the way out, he said it’s hard to imagine who will be qualified and willing to take over the top positions.

The IRS will have to rely more on technology to make up for the workforce cuts, veterans of Trump’s first tax administration said.

“More than anything, the ability of the IRS to continue to protect taxpayers’ data is going to depend on their ability to maintain their technology infrastructure that fights off the cyber-attacks,” Kautter said.

Charles Rettig, IRS commissioner appointed by Trump during his first term, said the agency still has a deep bench of employees who can protect the interests of taxpayers and the government. That, paired with the technology upgrades, could help the agency.

“It remains to be seen if the government is able to ultimately strike the appropriate balance between the impact of current and future technological enhancements and the appropriate number of employees necessary to provide meaningful services and to enforce the tax laws,” Rettig said.

Still, between the senior leadership departures and workforce cuts (the latest round came on Friday), taxpayers will likely face delays when dealing with the IRS in the coming months and in next filing season, said Doreen Greenwald, national president of the National Treasury Employees Union.

“Our voluntary system of tax compliance depends on having a fully staffed IRS ensuring the tax code is being enforced fairly for everyone to bring in revenue that keeps our country running,” Greenwald said. “Reduced staffing and lack of strong and consistent leadership at the agency will cripple the agency’s ability to serve the American people.”