Week in Insights: IRS Mass Firings May Be a Proof of Concept

Earlier this year, over 7,000 probationary IRS employees were terminated with all the warmth and human touch of a spreadsheet sort. There were no in-person performance evaluations, signed letters, or individualized reviews—just mass emails citing a mismatch between performance and mission needs.

A Treasury Inspector General for Tax Administration report dated Aug. 14 found that only about half of those employees had a performance rating on record, 90% of whom were deemed “Fully Successful” or better.

This is serious procedural mismanagement from a personnel standpoint. But it’s more of a success story from the perspective of the Department of Government Efficiency, the initiative ostensibly driving these cuts.

Despite the courts forcing the IRS to reinstate those employees, more than half didn’t come back. Some took an offered buyout, while others simply walked. Why wouldn’t they? They had just been treated like disposable data points by an agency that didn’t even bother personalizing their pink slips.

Mass firing people, erasing procedural fairness under the guise of performance management, and doing it fast enough to outpace internal mechanisms for formal objections doesn’t just reduce personnel; it destroys institutional trust. The idea of returning to work might feel like volunteering for a second betrayal.

Yet, these events mean DOGE did what it set out to do. The IRS now has thousands fewer employees, and it didn’t have to trigger the political tripwires that surround a formal reduction in force.

It’s hard to imagine future “efficiency” efforts in this vein won’t take notes on the IRS’s experience: Let the spreadsheet sort determine who stays and who gets cut, let the courts undo it if they want, then let low morale do the rest. We may see all this play out again.

—Andrew Leahey

A sign for the Internal Revenue Service is seen outside its building in Washington.

Photographer: Kayla Bartkowski/Getty Images

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed the Trump administration’s scrutiny of tax crimes as part of its immigration enforcement efforts, proposed IRS regulations on corporate spinoffs, and more.

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Insights

Corporate Tax Reporting Changes are Coming for UK Businesses

HW Fisher’s Andrew Tall says that a new era of digital corporate tax reporting is on the way for UK businesses, which will set enhanced disclosure standards.

Trump’s Fiscal Federalism Shift Forces States Into Tough Choices

Jonathan Burks of the Bipartisan Policy Center says reductions in federal funding for states create major challenges for state fiscal health and programs that millions of Americans rely on.

Accurate Records Are Crucial With Planned IRS Rule on Spinoffs

Retired IRS attorney Jean Broderick says corporations that want to spin off a subsidiary into a new company tax free will need detailed records that withstand scrutiny if the IRS finalizes regulations on corporate spinoffs.

Indian Tribunal Ruling on Derivatives Gives Clarity to Investors

AZB & Partners experts discuss the Mumbai Tax Tribunal’s ruling on derivatives that brings much-needed clarity for Mauritius-based investors and for those covered by treaties in other jurisdictions.

Reputational Risks of Golden Visas Demand Scrutiny by Investors

Quillon experts consider the advantages and reputational risks involved in golden visa programs and explain what factors high-net-worth individuals need to consider when using them.

Tax Crimes Should Be a Cause for Citizenship Denaturalization

Former IRS-CI agent Robert Nordlander says the Trump administration is justified in looking more closely at tax crimes amid its larger-scale immigration enforcement efforts.

Australia’s Focus on Data Centers Marks New Global Tax Frontier

Jones Day attorneys say that multinationals grouped into “clusters” for review by the Australian Taxation Office should use the inherently longer timeframes to develop their case before the ATO position is finalized.

UK Supreme Court Ruling Impacts Divorce Asset Sharing Cases

Taylor Walton’s Anna Patsalides explains the unanimous decision of the UK court confirming that non-matrimonial assets won’t be subject to the sharing principle and says this may lead to calls for greater certainty in family courts.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

A Louisiana tax-share deal’s failure to generate research funding more than a decade after its passage shows that such public incentive programs should include clawback provisions, Andrew Leahey argues in his latest Technically Speaking column.

To reduce political downsides, “this must be a coordinated move, whether through regional compacts, national best practices, or a shift in demands from the voting public writ large,” Andrew writes, adding that individuals should be made aware of incentive deals’ negative impact. Read More

News Roundup

OECD Proposes Changes to Global Tax Deal to Appease US

The OECD has proposed a range of tweaks to the global minimum tax agreement in a bid to quell US concerns about how the regime affects American companies.

Acting or Vacant: The New Status Quo for Leadership Roles at IRS

Top jobs at the IRS in the Trump administration generally have two forms in 2025: vacant or acting.

Corporate Income Tax Disclosure Deadline Nears Amid GOP Pushback

Companies are racing to meet a mandate to divulge more details about their tax obligations in financial statements starting early next year, even as the requirement continues to face congressional opposition.

Investors to Reinforce Stricter Standards for Energy Tax Credits

Clean energy tax credit investors may put more demands on developers before financially backing projects, in an effort to ensure the projects meet new, stricter guidance from the Trump administration.

Tax Management International Journal

Indian Supreme Court Explains Fixed Place Permanent Establishment

India’s recent court ruling will have broad implications in the determination of fixed place PE in India from a tax treaty interpretation perspective, say Deloitte Haskins & Sells LLP, India practitioners.

How Do Trump Tariffs 2.0 Impact Transfer Pricing and Vice Versa?

Companies should take a proactive approach to transfer pricing policies by closely monitoring import transactions and tariff compliance, reviewing and potentially revising their intercompany contracts, and considering whether a portion of tariff costs should be borne by a related party outside of the US, say a University of Notre Dame professor and Grant Thornton practitioners.

Tax Management Memorandum

How to Comply With Puerto Rico’s Short-Term Disability Mandate

Puerto Rico benefits & compensation attorney Carlos Gonzalez shares his practical experience with the alternatives available to companies doing business in Puerto Rico for complying with the local non-occupational short-term disability benefits mandate, commonly known as SINOT.