No, the IRS is not being abolished. The agency lost about a quarter of its workforce to voluntary buyouts and early retirements in early 2025, and Congress has clawed back most of the $80 billion supplemental funding it received in 2022, but the IRS is still processing returns and preparing for the 2026 filing season. The most prominent bill that would eliminate the agency, the Fair Tax Act, has been reintroduced in nearly every Congress since 1999 and has never received a floor vote.
What Actually Happened to the IRS in 2025
Between January and May 2025, the IRS lost more than 26,000 employees, mostly through voluntary buyouts and early retirement incentives. That brought staffing down sharply from the roughly 90,500 full-time equivalent positions the agency reported for fiscal year 2024.1Internal Revenue Service. IRS Budget and Workforce
The cuts hit every division. The branch that processes returns and answers taxpayer phone calls lost more than a fifth of its staff. The agency also shed about 26% of its revenue agents. Technology staff reductions disrupted plans to modernize computer systems that, in some cases, date to the 1960s.
Despite the losses, the IRS processed about 138 million of the roughly 141 million individual returns it received during the 2025 filing season. By August 2025, the agency canceled planned layoffs and began reaching out to some departed employees about returning. The National Taxpayer Advocate warned that staffing losses could still jeopardize the 2026 filing season, but the agency remains operational.
Funding Cuts
The Inflation Reduction Act of 2022 originally allocated roughly $80 billion in supplemental funding to the IRS over ten years, the largest investment in the agency in decades.2U.S. Government Publishing Office. Public Law 117-169 Through a series of bipartisan budget deals between 2023 and 2026, Congress rescinded more than $50 billion of that allocation. The most recent cut, in the Consolidated Appropriations Act for fiscal year 2026, took back another $11.66 billion focused on technology and operations. Roughly $26 billion of the original $80 billion remains.
The Treasury Department also suspended the IRS Direct File program in October 2025, citing high costs and limited participation after about 297,000 returns were filed through the free system.3Department of the Treasury. Report on the Replacement of Direct File None of these changes eliminate the agency. They shrink it.
The Fair Tax Act: The Bill That Would Eliminate the IRS
The Fair Tax Act is the most prominent legislative proposal that would abolish the IRS outright. Reintroduced in January 2025 as H.R. 25 in the 119th Congress, the bill would replace federal income taxes, corporate income taxes, payroll taxes, and estate and gift taxes with a single national retail sales tax.4U.S. Congress. H.R. 25 – FairTax Act of 2025 States would take over tax collection and keep a small percentage of revenue to cover administrative costs. The IRS itself would be eliminated after a transitional period.5U.S. House of Representatives (Buddy Carter). Carter Introduces Bill Abolishing IRS, Tax Code
The 23% Rate
The bill sets the sales tax at 23%, but that figure is calculated in a way most consumers aren’t used to seeing. It uses a “tax-inclusive” method: on a $100 total purchase, $23 goes to the government and $77 covers the item. Calculated the way state sales taxes work, where the tax is added on top of the sticker price, the equivalent rate is about 30%.6U.S. House of Representatives (Buddy Carter). Myth v. Fact: The FairTax Act Supporters argue the inclusive method allows a fair comparison to income tax rates, which are also calculated as a percentage of total income. Critics counter that consumers would naturally compare the rate to the exclusive rates they already see at checkout.
State-level sales tax rates currently range from zero in five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) up to 7.25% in California. Layering a 23% federal tax on top of existing state and local sales taxes would create sticker shock unlike anything American consumers have experienced.
The Monthly Prebate
To prevent the sales tax from disproportionately burdening lower-income households, the bill includes a “family consumption allowance,” a monthly government payment to every household regardless of income. The payment amount is based on household size and the federal poverty level, multiplied by the sales tax rate. The idea is that no household would pay effective tax on spending up to the poverty line. In practice, it would function as one of the largest cash transfer programs in American history.
Where the Bill Stands
H.R. 25 was referred to the House Ways and Means Committee upon introduction in January 2025 and has not advanced since.4U.S. Congress. H.R. 25 – FairTax Act of 2025 Versions of this bill have been introduced in nearly every Congress since 1999, and none has received a floor vote in either chamber. The bill also contains a self-destruct mechanism: if the 16th Amendment is not repealed within seven years of enactment, the national sales tax would automatically expire.
Why Abolishing the IRS Is Legally Difficult
The constitutional authority to tax income does not depend on the IRS’s existence. The 16th Amendment, ratified in 1913, gives Congress the power to “lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states.”7Cornell Law School. 16th Amendment – U.S. Constitution If the IRS were dissolved tomorrow, Congress could assign collection duties to another agency or create a new one. The taxing power stays with Congress regardless of which office processes the paperwork.
That is why the Fair Tax Act includes a 16th Amendment repeal trigger. Without repealing the amendment, a future Congress could reinstate an income tax alongside the new sales tax, leaving taxpayers facing both. Repealing a constitutional amendment requires either a two-thirds vote in both chambers of Congress followed by ratification from 38 state legislatures, or a constitutional convention called by two-thirds of the states. The last time an amendment was repealed was 1933, when the 21st Amendment ended Prohibition.
Ordinary legislation faces its own hurdles. A bill needs a simple majority in the House (218 votes), but in the Senate, the filibuster effectively requires 60 votes to advance most legislation past debate.8U.S. Senate. About Filibusters and Cloture Even if a bill cleared both chambers, the president could veto it, sending it back for a two-thirds override vote. Fewer than 10% of presidential vetoes have historically been overridden.
The $696 Billion Reason the IRS Keeps Getting Funded
The federal government loses hundreds of billions of dollars annually to unpaid taxes. The IRS projects the gross tax gap for tax year 2022 at $696 billion, the difference between what taxpayers owe and what they actually pay on time.9Internal Revenue Service. The Tax Gap After enforcement efforts and late payments, the net gap still sits at roughly $606 billion.10Fiscal.Treasury.gov. Tax Gap – FY 2024 Financial Report
Individual income tax makes up the largest portion at about $514 billion, followed by employment taxes at $127 billion and corporate income taxes at $50 billion.10Fiscal.Treasury.gov. Tax Gap – FY 2024 Financial Report The size of the gap gives lawmakers in both parties an incentive to maintain some form of enforcement apparatus, even when they disagree about how the IRS should operate or how much funding it deserves.
Arguing the IRS Has No Authority Is Not a Legal Strategy
If you have seen claims online that the IRS lacks authority to collect taxes or that the income tax is unconstitutional, be aware that those arguments carry real financial penalties. Filing a tax return based on a frivolous legal position, such as claiming wages are not taxable income or that the 16th Amendment was never properly ratified, triggers a $5,000 civil penalty under federal law.11Office of the Law Revision Counsel. 26 USC 6702 – Frivolous Tax Submissions The IRS maintains a published list of positions it considers frivolous, and the penalty applies whether or not you actually owe tax that year.
Taking a frivolous argument to Tax Court raises the stakes. The court can impose an additional penalty of up to $25,000 for maintaining a frivolous or groundless position, or for filing primarily to delay proceedings.12Office of the Law Revision Counsel. 26 USC 6673 – Sanctions and Costs Awarded by Courts In a 2025 Tax Court case, taxpayers who advanced a constitutional challenge to the income tax received a $1,000 penalty along with a warning that future frivolous filings would draw significantly harsher sanctions. Whatever your feelings about the IRS, the legal system treats claims that it lacks authority to exist as settled law.