The IRS Cancelled Contracts Potentially Saving Hundreds of Millions of Dollars, but the Impact on Taxpayer Service Remains Unknown

Report Information

Summary

As of January 2025, the IRS had over 3,000 active contracts. In response to the executive orders, the IRS identified 501 contracts for potential cancellation by May 2025 on its Procurement Hub (i.e., the platform used to track and report all Defend the Spend contract dispositions). According to that platform, by July 2025, the IRS opted to cancel 344 of those contracts. However, the actual cost savings from these actions were either limited or unknown because most of the obligated funds had already been expended or the contracts had no obligated values. The 344 cancelled contracts had potential cost savings of $440 million in avoided costs and $205 million in open obligations (i.e., the difference between how much the IRS has committed to spending and how much has been spent to date). The Secretary of the Treasury has indicated that customer service is one of the top priorities for the IRS. Of the 501 contracts, we identified 146 that included taxpayer-facing services such as updates to tax filing systems, interpreter support, and expert witness testimony. By July 2025, the IRS opted to cancel 115 of the 146 taxpayer-facing contracts, while the remaining 31 were either descoped or retained. The 115 cancelled contracts represented nearly $170 million in avoided costs and over $85 million in open obligations. Cancelling taxpayer-facing contracts may create service gaps, delay assistance, and require the IRS to adjust resources to meet its mission. This report provides information only, so we made no recommendations. We plan to evaluate the IRS’s implementation and oversight of the Procurement Hub platform to administer its contract rationalization project.