The Accounting Podcast

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Blake Oliver: [00:00:10] Hey, everyone. Welcome back to the show. I'm Blake Oliver. Today we have a special guest who brings us an insider's perspective on the recent shakeup at the Internal Revenue Service. Jeff Johnson, a former probationary employee at the IRS, joins us to share his experience in the wake of the agency's massive workforce reduction. Jeff's story is part of a broader narrative unfolding across the federal government, spearheaded by the Trump administration and the Department of Governmental Efficiency, led by Elon Musk. In February 2025, the IRS laid off approximately 7000 probationary employees, including Jeff, as part of a sweeping initiative to downsize the federal workforce. This reduction is just the beginning of what could be a much larger cut. The IRS is reportedly drafting plans to slash its workforce by as much as half, potentially affecting up to 45,000 jobs out of its 90,000 workforce. These cuts are occurring despite the IRS critical role in revenue collection and tax enforcement. The layoffs have raised concerns among experts about the agency's ability to function effectively, particularly in areas such as compliance and auditing of high wealth individuals. As we dive into Jeff's personal experience, we'll explore the potential implications of these cuts on tax collection, customer service, and the overall functionality and functioning of the IRS. Jeff, welcome to the show.

Jeff Johnston: [00:01:30] Well, thanks for having me.

Blake Oliver: [00:01:31] Can you start by telling us about your role at the IRS and how you learned about these layoffs?

Jeff Johnston: [00:01:37] My role at the IRS is I was a revenue agent. I was learning how and being trained to, um, audit large corporations. I mean, talking about anywhere from 10 million all up to fortune 100 fortune five companies. I was seven and a half months into it, and this was like probably the first week in February or the second week. You know, we were walking along, we knew where something had happened because everybody's reading the papers, right? Or reading it. Not the papers. Reading the news online. You're following it. And about 3:00 on Friday before the week of 17th to the 21st, they sent out an email saying all travel has been canceled. If you're going someplace for next week, cancel it. Nobody's going anywhere. Even if it's face to face education or training or anything. Just you got to be in the office. So we show up at the office Monday, and then you're just sitting around twiddling your thumbs, and everybody kind of knows what's coming, but they can't get it done fast enough. And they're having trouble. And there's like preliminary injunctions being filed in D.C. and all that kind of stuff. So it's on again, off again, on again, off again. And then finally Thursday of that week they start saying, okay, we're doing this show up with all your stuff, and you clean off your desk and turn in all your stuff to your manager and they just walk out.

Jeff Johnston: [00:03:05] We were supposed to get like an email terminating us, but they couldn't get that together. They didn't get that done in time. And so we didn't get the email. So at the end of the day, you finally just said and the managers, you know, they were trying to help because they were they were so out of the loop. They didn't know about it until maybe that Monday or Tuesday of that week because it was done way, way, way at the top. From what I heard, even the head of the commissioner of the Elbe, Elbe, and I didn't even know about it until that week, that it was they knew it was going to come, but they weren't informed about it from the way highers up. Um, and so walk into my manager's office on that Thursday, me and a line of a whole bunch of other people gave them my, you know, my laptop, my card, my pocket commission, which is our badge kind of thing. I didn't carry a gun Despite the rumors that everybody. That we all had guns. So I had there's no gun turning all my stuff and then walked out and that was that was it.

Jeff Johnston: [00:04:08] And then there's chatter amongst all the people going on right now about whether or not we're really going to get it back, whether or not the injunction. I think it was an injunction going on in California that, you know, some judge said that the Trump administration didn't have the right to do this, which is, you know, as a lawyer, I've kind of read it, and now he's got the right because I've read the I've read the regs and the rules and he's got the right to do it. So anyway, that's all going on. So that's kind of how it went down. You know it was just surreal. I mean it was just everybody was kind of walking around like zombies. Even the managers. And the higher level upper managers like the territory managers and the, you know, director of field operations, kind of I mean, they were all just kind of dumbfounded. I mean, they just couldn't believe because, I mean, there was people with 35, 40 years of experience that had never, ever, ever seen that kind of something in the IRS, and they were just kind of like, they felt bad for us because, you know, they were they were looking at the IRA funding.

Jeff Johnston: [00:05:06] Right? That's how we all got hired. They were thinking, okay, this is the new wave of people, and we're bringing all these great people in because they brought in a lot of people really talented. Most of the people I started with, I mean, I've got a law degree. I was one of the few that had a law degree with it. But there was a lot of people with, you know, masters of taxation and ten, 15 years, five years of comptroller, CFO type experience and a heavy duty accounting experience, which is the kind of people you want auditing taxpayers, large businesses because they know what to do. And you know, they know what. They know what to look for. They know how an accounting system works. It's not like you're hiring people. They used to hire just people straight out of college who had to learn not only the process of the IRS, but how businesses work and how accounting systems work and stuff like that. And they had all these experienced people that they trained them for six months to a year or year, whatever. And they just threw it away. And nobody's done the cost on that. I mean, can you imagine how much it cost to train people? Right. Just to.

Blake Oliver: [00:06:05] Recruit them and train them.

Jeff Johnston: [00:06:06] Recruit them and train them. And the training is intense. It is hard to learn the multiple, multiple processes you got to learn in the IRS to do become just an effective, proficient revenue agent. And they just threw all threw all that away so that it created this process, that all these people just go, I can't believe they're doing this. I mean, this is just, you know, it's just crazy. And so it was kind of like people were walking around like zombies and feeling bad for all the people that had to experience that, especially on the bad side of it, you know? And then they're all sitting around wondering, you know, you mentioned the, the what's called the new. The next thing is coming is called a reduction in force is a Riff is is the acronym for that. And that's a longer process. But they've got it in place. I mean it's like there's there's like I think there's like 30 day notice to the union and then there's like 60 days. And what they do is they rank everybody from experience to what your latest employee evaluations are, an average of your last employee evaluations. Then they score it and they have a, you know, and so they figure out how many people they want to get rid of and they start, you know, the lowest number on that score. You know, they start taking until they end up with the people who are enough people that they want to reduce. And so that's how that worked.

Blake Oliver: [00:07:23] So so it seemed like it was very sudden for you. I mean, there were rumors obviously, but like less than a week, what.

Jeff Johnston: [00:07:30] Clued me in and I guess I probably should have taken the fork in the road email. Right. You know what I'm talking about, right? It's the email that they sent out. It was the deal which was send back, respond to this email with the word resign and you will get paid through September 30th, which is the fiscal year end for the government. And you'll have all your benefits and you get pay even if you get I mean, it said, even if you get another job will still pay you and 2020 hindsight, you should have taken that. But at the time that came out, there was still kind of this chance that maybe they won't do this and stuff like that. So you're doing the odds and you're thinking, okay, I'm giving up a job and having to look for another job by September 30th versus a job I think I'm going to keep and probably will keep for a long time. And, you know, and then later on, you know, it was but you got a hint of it because the day after Trump was inaugurated, they sent out an email to all the agency heads saying, give us a list of all your probationary employees. And so you knew at that point you had a target on your back.

Blake Oliver: [00:08:38] Did you know anyone who took the fork in the road?

Speaker3: [00:08:42] A couple people there was there was a couple.

Jeff Johnston: [00:08:43] People in in my group who had been there, and this is a great deal. They'd been there. Maybe they started in January, right? They started like January 1st, January or January 2nd or whatever the first business day of the year was. And yeah, took it. They had something to go back to or something like that and they took it. Now, I don't know from a legal standpoint, I kind of read into that, and I don't know if he technically can do that, because I think they tried to put him on just inactive or not inactive, but I can't remember what they call it, but a status where if you go read the code, you know, under title five, it kind of says you can only do people put people in that status for like ten days. So I don't know how they're getting away with saying, you're going to be on leave of absence type status for that long of a period. There's some wiggle room in it that says, or it's such or such time as we deem necessary. Maybe, but you're probably going to have to litigate what that means at some point. Who knows? So there's people that have been there for like a month that took the deal and got it. That's a great deal.

Blake Oliver: [00:09:52] Seven, eight months of pay.

Jeff Johnston: [00:09:54] Yeah, seven, eight months of pay. Yeah.

Blake Oliver: [00:09:56] I think the IRS did say that they'll have to work through May.

Jeff Johnston: [00:09:59] Well, now that's some people. That's. So a revenue agent wouldn't work. If you were a revenue agent, you wouldn't do that because you're not dealing with taxpayers. I mean, you're not dealing with filing issues, so it's only the people that had to deal with, you know, answer the phones and do tax season filing, compliance type work and revenue agents. What I did, I didn't do that. In fact, we, you know, we we have no busy season per se as a revenue agent. You're just in fact, it probably slows down because you're typically dealing with a power of attorney, a CPA, or an attorney who or who is busy doing tax compliance. And they can't answer your, you know, information requests for documents and things like that because they're busy filing a tax return. So it actually slows down for revenue agents during busy season.

Blake Oliver: [00:10:51] Did you get any communication from the union? Have you been in touch with the Federal Workers Union or the. Is there a union for the IRS?

Jeff Johnston: [00:10:58] Yeah, it's the ntsu. I think National treasures something union. Yeah. They were really active in in trying to keep people's morale up as best as they could and really kind of fighting for the employees. And they've still got some things going. But I, you know, I put my legal hat on and kind of assessed it. And unfortunately I didn't I didn't think that was a win. Maybe I'm wrong, but I don't I don't see much luck, at least with regard to the probationary employees. You know, that's helping. But they were certainly really active in trying to get lawyers and help people for sure.

Blake Oliver: [00:11:39] So, Jeff, you're a lawyer, you're a CPA.

Jeff Johnston: [00:11:42] Yeah.

Blake Oliver: [00:11:43] You were at the IRS for seven months? Yep. So you were there long enough to get an idea of how things work as a revenue agent? Yeah. How do you. I was yeah, go for it.

Jeff Johnston: [00:11:53] I mean, I was just getting proficient enough to come where I can, you know, go. I can do this. I mean, it's it's, you know, we could get in the nitty gritties, but it is a really, really hard job to learn only because of the systems that you have to use within the IRS. Um, are just it's like going back, it'd be like you going back to an IBM XT. I don't know if you ever remember those, but.

Blake Oliver: [00:12:21] Does it have a green screen? Because I remember those ones.

Jeff Johnston: [00:12:24] Yes. They're actually actually one of the main systems that we use to get taxpayer information is in fact a green screen. It looks like that it goes to a command line. And you have to know in your head or look it up on a list what the commands should be to get the reports that it spits back to you and it spits back on that screen. These reports that are supposed to be like in columns and stuff, but they, they, you know, they wrap. And so there's just all this disjointed stuff and then it's all in code. So if you're looking at something that's supposed to be like four and 1120, that's an O two, you know, and you're supposed to know that in your head. So you see, when you see the code under a certain column, it says 020, that means an 1120. And you just pick this up as you go. It's like learning hieroglyphics. And it's a.

Blake Oliver: [00:13:16] It's a whole language.

Jeff Johnston: [00:13:17] It is a whole language. Yeah. It's like learning another language and and and there's, there's not like this beautiful kind of audit dashboard for the taxpayer that you could do all this stuff. If you want to get information, you got to go in that system. It's called Ides. And it's I think it's information data retrieval system. I think that's what that acronym acronym stands for. And that is the main database that has all the taxpayer information for everything that's ever been filed on any taxpayer. And I think they keep it. They keep seven years of data, and every year they roll off one year. And. But it is like for any one year, I think there's maybe a billion returns. 1 billion with a B returns that. So that contains everything every 940. Every 940, you know, quarterly estimated tax payer. It's all in there. And you're and part of what you're doing when you audit somebody is you go in that system and you look at it and that helps you with the audit, you know, in ways so but it is, it is, it is um, it's so old. I mean, everybody knows this is nothing. It was built in the 60s using COBOL as, as the as the language. And it is it it looks it still.

Blake Oliver: [00:14:39] Wow.

Jeff Johnston: [00:14:40] Yeah.

Blake Oliver: [00:14:42] So that's just one of the systems that you use. So you use that system to access, uh, tax return information. Right.

Jeff Johnston: [00:14:49] So, you know, one of the one of the procedures is, you know, you got to make sure that they're up to date on all their filings. And so that's, that's a that's a report I can't remember the name. They're all they're all acronyms. Like like there's one of them is like called a amduscia. And I can't remember what Amduscia. It's an acronym for something, but that's all the taxpayers kind of information and the types I think it's the types of returns they're supposed to file and all that kind of stuff, you know? So you look at that and you look at that to check what they call the asset date, which is the statute of limitations date, because you want to see what that is. And so that's a report that gives you that information. And there's another report called a maybe a bimbo or something or another. Um, and that's another acronym B I'm b, I'm f o l. And there's different flavors of that. And that'll get you a list of all the returns that they've filed and what they've paid, and whether or not they owe money or they're up to date, you know, they're they've paid the correct amount of tax Given their situation. And so you check that kind of stuff. And so again there's multiple multiple, multiple reports that you can get out of that database information. But again, if you had it on a nice dashboard you could just click buttons and write, you know. Yeah. But it's that's not the way it is.

Blake Oliver: [00:16:11] So what I'm hearing is that the systems in the IRS are very antiquated, difficult to work with.

Jeff Johnston: [00:16:17] They are antiquated. I mean, it adds a lot of time to an audit. I mean, I think if they could streamline it, figure out a way to do that and make that database much more user friendly, you could probably do audits a lot faster. That's, in my personal opinion, just by seeing how long it takes to get some of that stuff done. It's just amazing.

Blake Oliver: [00:16:43] I mean, were you when you pull this information from that system, were you printing it to paper? How were you getting it out of there?

Jeff Johnston: [00:16:49] Some people do. I you know, I would print it to a PDF because you got to keep all that in kind of a case file. I mean, that's another system that we use. It's it's sort of an attempt at a dashboard, but it's not even close. But so all that's that's kept in a separate little repository that those reports are and so are kept in there. And you print them to PDF and you put them in there, and then you kind of mark them up saying, okay, this is this is the statute date, this, you know, all these all check, check, check, check. And you're going at that. But um, yeah.

Blake Oliver: [00:17:24] So because the IRS systems are so antiquated, it's very dependent on people.

Jeff Johnston: [00:17:29] Yeah. It is, it is very, very.

Blake Oliver: [00:17:32] So how do you think these layoffs are going to affect the IRS mission, taxpayer service audits, that sort of thing?

Jeff Johnston: [00:17:40] Yeah. So I think taxpayer service, as far as people just calling in with questions at the IRS filing their tax returns, I think that's going to be okay. They aren't going to I at least this busy season, they aren't going to cannibalize that and have, you know, these hour long, two hour long wait times and that would. They're going to they're not going to do that going forward. I you know, I don't know what is going to how it's going to affect the compliance and at least the audit side of it. Because when we got there, when I got there, I mean, there was all these, all these, uh, you know, stories that, hey, we never had enough people. I mean, for so long, I think you know this, but for so long, the IRS was giving these just barely tiny, tiny increases for, I mean, for decades. And so they are running. They were used to running on just, uh, small budgets and never had any time to improve anything. That's why none of these systems are improved. They didn't have any money to do it, and they didn't have any people. And so there's a lot of people that are are getting audited or that we're now starting to get audited, that they were kind of ramping it up, and now it's just probably just going to go back to the way it was. And so and I'll give you an example. So my cases you would get a report. Another report was audit history. And so it would give for the last five years. And there was a, there was a code that showed well the well let me let me back up. So there's a system within the IRS that nobody really knows about that they keep secret that that is the algorithms they use to whether or not to pick a return.

Jeff Johnston: [00:19:30] And this is all public information. If you go read the Internal Revenue Manual that's online. I mean, all this is in there. So I'm not giving any, any back end secrets. If you want to go find it you can find it. But so but that system and those algorithms, those are not quite top secret but they're kind of the equivalent of we're not going to tell you how we pick, but so returns will be flagged for audit. And then there's a group of people that actually kind of peruse them and look at them really quick, kind of highly trained, seasoned people that transfer over into that thing and they'll look at it and go, yeah, there's a problem here. And they'll kind of write it up and then pass it on to the to the managers, who then assign it to revenue agents. But for so many, all the cases that I got, every single one of those had been looked at for the past five years. But the code that, that that was finally resolved on it was, we're not going to audit this because we don't have enough resources to audit the return. And so and that's just my I only had three assigned for training. And um, I think so what's going to happen is, you know, the system is going to trigger all these returns, and they're just not going to have enough people to do it, and it'll just kind of slip on by and the statute of limitations will run. And, you know, if there was extra revenue that could have been created because of the audit and they're just giving it away.

Blake Oliver: [00:21:06] How do you feel about this?

Jeff Johnston: [00:21:09] You know, for me personally, well, one, I feel really bad for all the people. A lot of these people that I worked with had given up careers. You know, it really solid careers in other places. And they wanted to do something different. This is kind of a, you know, people beat up on the IRS. But for me and all these other people, it was kind of a cool job. I mean, I, you know, you were kind of doing something different, again, not carrying a gun, but you were doing something important. You were serving your country and making a difference in your own way. And you're using a lot of your education. So a lot of people gave up careers to come over and you know, and do this and devote themselves to helping and serving their country and being a part of something. And then they just kind of said, uh, you're gone. Go take care of yourself. Go get a, you know, go, go find something in the private sector again. You can do that, you know. And it was it was very dismissive. And it's it's kind of sad for me personally.

Jeff Johnston: [00:22:06] I mean, it was for me, I'm kind of an older person in that group. And for me, I was looking at it kind of like an indie, the indie career capstone, for just being able to being able to do something again with my. I've got 30 years of just kind of a CFO, corporate attorney kind of job or controller, especially in smaller businesses and startups and things like that. But, you know, I know how accounting systems work, and I was looking to use all that to just kind of do, again, serve my country and do something that meaningful with all that. And it just kind of got they don't they didn't they don't care, you know, and or or the higher higher ups don't care the lower level managers and the territory managers, they care. They didn't want this at all. And so it's just kind of like it's a shame that the government's not using the people that were really dedicated and wanted to do this, and they just kind of, with a blunt ax, got rid of them of us all.

Blake Oliver: [00:23:10] What's next for you, Jeff?

Jeff Johnston: [00:23:12] For me, you know, I don't know. I you know, I probably I was, I was thinking about maybe going and starting when the, before the IRS opportunity came along, I was, I was trying to build a, you know, fractional CFO, fractional accountant type practice. And I guess I may just go back to that. So.

Blake Oliver: [00:23:36] Jeff, thank you for speaking with me, sharing your story. Sure. And best wishes to you on your on your next career move.

Jeff Johnston: [00:23:45] All right. Well well, well hopefully one will come up, but I appreciate it.