The Trump administration's restructuring of the Internal Revenue Service (IRS) has taken a new turn, reigniting concerns about how the agency's services to businesses and individual taxpayers will be affected amid layoffs and a growing leadership vacuum.

According to a New York Times report last Friday, acting Commissioner Gary Shapley was removed after only a few days in the role, replaced by Treasury Deputy Secretary Michael Faulkender. The Associated Press noted that Faulkender is the fourth leader to take charge of the tax agency since President Trump took office in January. Shapley's removal comes amid a surge in the number of senior IRS officials resigning, being laid off, or demoted due to Trump's policy decisions.

The IRS and the Treasury Department did not respond to requests to confirm Faulkender's new position. However, Treasury Secretary Scott Bessent hinted at the change in a social media post last Friday. "Public trust in the IRS must be restored, and I fully believe @TreasuryDepSec Michael Faulkender is the right person for the moment," Bessent wrote on X.

"There are too many gaps in the IRS's elite leadership right now, and the situation is very chaotic," Larry Gray, government liaison for the National Association of Tax Professionals, said in an interview Monday. He noted that because it remains unclear who the leaders are and how many people will leave, it is difficult to assess the downstream impact on individual and business taxpayers. "We don't know who is ultimately left on the field to play."

Beyond the loss of top leadership, the agency's workforce is being significantly reduced as part of the Department of Government Efficiency's efforts to shrink the federal government. The IRS had about 100,000 employees before Trump took office, and according to The New York Times, the agency is expected to lose about a third of its workforce this year due to resignations and layoffs, with more than 20,000 IRS employees having signed up for the government's latest deferred resignation program. Gray said many IRS employees are in shock, and the removal of management and senior staff has heightened uncertainty.

"It's like the fourth quarter of the Super Bowl, you're in the huddle listening to the play call, and suddenly the head coach gets fired," Gray said metaphorically.

Nevertheless, Gray noted that bringing in a leader from the Treasury Department could provide some continuity until a permanent commissioner is appointed. If Faulkender later returns to the Treasury, he will have an in-depth understanding of the IRS's internal operations, which could help the agency run more smoothly. Trump's nominee for permanent commissioner is former Missouri Congressman Billy Long, who still needs confirmation by the Republican-controlled Senate.

Alex Muresianu, senior policy analyst at the Tax Foundation, said that if the leadership turmoil is not resolved, taxpayer services will be the first to suffer, while the impact on tax collection is expected to appear later.

"If economic conditions are fairly normal and there aren't too many major policy changes, the medium-term impact could be smaller," Muresianu wrote in an email response. "But the agency's ability to respond to crises could be weakened (for example, during the pandemic, the IRS was severely stretched due to the dire overall economic situation and its responsibility for managing several major relief programs)."

Misty Erickson, tax content project manager at the National Association of Tax Professionals, noted that staffing cuts during the filing season have already concentrated the most affected areas in tasks requiring employees to review correspondence rather than process returns. She also said there have been reports of longer wait times for phone assistance.

"With the upcoming layoffs, expect more delays in correspondence with the IRS and potential delays in IRS appeals," Erickson said. "Both situations require human intervention to move the process forward."

Separately, in February, the National Association of Tax Professionals urged Congress to protect IRS information, citing concerns that Elon Musk's Department of Government Efficiency could be granted access to sensitive taxpayer data, as CFO Dive previously reported. Erickson said the association has not yet received a response to its letter.