Acting IRS chief O'Donnel to step down this week

It's probably the worst time to see leadership and staffing uncertainty at the Internal Revenue Service, but that's exactly what's been happening during the 2025 tax season so far. 

In the latest development, Acting Commissioner Douglas O’Donnell is reportedly set to retire this week, as thousands of IRS employees have been laid off as part of broader government reductions under the Trump administration.

As reported by the Wall Street Journal, O’Donnell, a 38-year veteran of the IRS, took over as acting commissioner last month following the departure of Danny Werfel, a Biden appointee who resigned on Inauguration Day. Citing people familiar with the matter, the Journal said O’Donnell had initially planned to retire earlier but was urged to stay by a number of Treasury officials.

He's expected to officially step down on Friday.

Melanie Krause, chief operating officer at the IRS, is expected to assume the role of acting commissioner in the interim. President Trump has nominated former Republican Congressman Billy Long to lead the agency for the remainder of Werfel’s term, which extends through November 2027. However, Long has yet to receive a Senate confirmation, meaning Krause will likely oversee much of the current tax-filing season concluding in mid-April.

O’Donnell’s departure comes amid sweeping changes to the IRS, including the layoff of more than 6,000 probationary employees last week. The move is part of the administration’s broader initiative to reduce the size of the federal workforce. Trump and Republican officials in Congress have been working to roll back an $80 billion funding boost the IRS received under the Biden administration, which was aimed at boosting enforcement, modernizing technology, and improving customer service for taxpayers.

With that boost, the IRS was able to collect more than $5 trillion in revenue for fiscal-year 2024, with nearly $100 billion coming from enforcement actions including efforts to recover unpaid taxes from wealthy individuals and businesses. While the IRS said in its statement of priorities for 2025 that it would continue those efforts, tax professionals anticipate the Biden-era clampdown on higher-net-worth entities will weaken under the Trump administration and the Republican-led Congress.

To be sure, the impact of the IRS workforce reductions on tax processing and enforcement remains uncertain. As noted in a report by MarketWatch, tax professionals are already fielding concerns from clients about possible delays and disruptions.

“When taxpayers expect prompt customer service and smooth processing of their tax returns, the administration has chosen to decimate the whole operation by sending dedicated civil servants to the unemployment lines,” said Doreen Greenwald, national president of the National Treasury Employees Union.

Despite speculation on social media about the IRS’s future, with some voicing their intentions online to skip filing their taxes this year as a form of conscientious objection to DOGE's federal downsizing efforts and its repercussions, tax experts are advising individuals to proceed with their filings as usual. In what could be a sign of resistance and foot-dragging, the IRS has reportedly received 1.7 million fewer tax returns so far this tax season compared to the same point in time last year.

While experts are warning clients of the penalites for skipping tax filings, and advising of the potential for delays in communication and service, leadership from the White House indicated the IRS will do what it can to proceed with business as usual ahead of the April 15 filing deadline for most Americans.

“I think our objective is to make sure that the employees that we pay are being productive and effective,” Kevin Hassett, director of the White House’s National Economic Council, told reporters Thursday.