Internal Revenue Service
(IRS)
Department of the TreasuryTaxpayers needing customer service; enforcement of tax compliance; Direct File program users
Summary
The Internal Revenue Service (IRS), part of the Department of the Treasury, is the federal agency that collects taxes, processes tax returns, answers taxpayer questions, and enforces tax laws. The FY2027 budget proposes cutting IRS funding by $1,400 million (about 11%), which would reverse extra money Congress gave the IRS through the 2022 Inflation Reduction Act, shrink the enforcement workforce that audits tax returns, and shut down the IRS's free tax-filing tool called Direct File.
Who Is Affected
Taxpayers who call the IRS for help, businesses and high-income filers subject to audits, and the hundreds of thousands of people who used Direct File—the IRS's free government-run e-filing option that grew from a 12-state pilot in 2024 to about 25 states in 2025—would all feel this cut. IRS employees in enforcement and taxpayer-service divisions, many of whom were hired using Inflation Reduction Act funding, are also directly affected since their positions depend on that money.
What this cut would actually mean
Closing Direct File means the taxpayers who used it lose a free way to file directly with the IRS and would have to go back to paying for commercial tax software or a paid preparer. Shrinking enforcement staff means fewer audits of wealthy individuals, large partnerships, and corporations, and independent budget analysts have found in the past that cutting IRS enforcement funding tends to lose the government more in uncollected taxes than it saves in spending, which can widen the tax gap and add to the deficit. Fewer customer-service staff can also mean longer wait times on IRS phone lines and slower processing of returns and refunds during tax season.
Why this hits Alabama harder
This cut shrinks IRS customer service and shuts down the free Direct File tax program, which mainly helps lower-income taxpayers. Alabama's poverty rate is about 15.2%, higher than the roughly 12.5% national rate, and Alabama is named among the states with the largest share of Earned Income Tax Credit filers, so Alabamians rely more on affordable, well-supported tax filing help than the average American. That means fewer IRS staff and no free filing option would likely hit Alabama taxpayers harder than most other states.
- What is the poverty rate in Alabama? | USAFacts — Reports Alabama's 2024 poverty rate at about 15.2% of the population.
- List of U.S. states and territories by poverty rate - Wikipedia — Shows the 2023 national poverty rate at about 12.5%, for comparison with Alabama's rate.
- Budget Basics: What Is the Earned Income Tax Credit? - PGPF — Notes that Alabama is among the states with the largest proportion of tax filers receiving the Earned Income Tax Credit, a group that depends heavily on IRS customer service and free filing tools.
Sources
- IRS Direct File for free — Official IRS page describing the Direct File program, which let eligible taxpayers file federal returns for free directly with the IRS; this is the program the FY2027 budget proposes to close.
Administration's Stated Rationale
“Reverses Inflation Reduction Act IRS funding; reduces enforcement staffing; closes Direct File free tax program.”