Cutting contracts can promise quick savings, the harder question is where the cost actually lands

Guest:	LaToya George
Title:	Director in taxpayer services and operational support in the Office of Audit at the Treasury Inspector General for Tax Administration
Summary:	A recent review of IRS contract cancellations found hundreds of millions of dollars in potential savings, but far less clarity about how those decisions shifted impact onto service delivery and workloads. The findings raise questions about how agencies assess who absorbs the risk when decisions are made quickly.

The Federal Drive with Terry Gerton provides expert insights on current events in the federal community. Read more interviews to keep up with daily news and analysis that affect the federal workforce. Reach out to Terry and the Federal Drive producers with feedback and story ideas at FederalDrive@federalnewsnetwork.com.

Interview transcript

Terry Gerton The IG office there, TIGTA, has recently looked at contracts canceled by the IRS in 2025. Remind us, if you would, of the context of that. What was going on that you were looking at particularly?

LaToya George In January 2025, the president issued several executive orders asking for agencies to identify ways to save on funding, including canceling contracts. After that the Department of Governmental Efficiency actually initiated a defend the spend initiative. This was something government-wide, and IRS participated. From that, the General Services Administration identified a list of contracts that the IRS could review. General Services administration sent that list over to Treasury Department and Treasury afforded to IRS. Their officials throughout the agency took a look at the contracts and identified which ones that they could either cancel in full, descope, meaning just cancel a portion of it, or whether they needed to keep them because it was very important to the IRS mission.

        Federal and industry experts explain why visibility, crypto agility, and execution — not just new algorithms — will define quantum readiness in this new ebook. Download today!

Terry Gerton And as you looked at that set of contracts there at IRS, what were you trying to understand about the real effect of those decisions?

LaToya George In our review, we wanted to identify the different types of contracts that were canceled and specifically to see any that were going to be taxpayer forward-facing, so really impact taxpayer services. So we took a look at just the different ones that could impact just customer service, for example, and that’s what we focused on. That wasn’t necessarily a focus during IRS’ decision to cancel certain contracts, but it was part of our review so that we could let taxpayers know that there was any areas that may impact just the upcoming filing season, well, the filing season that has ended now.

Terry Gerton Let’s start at the high level and then work our way down then because your report shows that IRS identified hundreds of millions of dollars in potential savings, but that the actual impact of those terminations was either limited or unknown. What’s driving the gap between the savings headline and what’s really happening on the ground?

LaToya George So certain contracts are award types that do not necessarily carry an obligated value, and so it’s not as easy to identify potentially the avoided cost or the cost savings and directly how it’s going to impact the taxpayer on a daily basis. And so in our review, we looked to see if there were contracts that showed the specific avoided costs once it was canceled, so that would be any contract that maybe had the option to expand the contract by a few years, but by canceling it right now, then you cut off those additional years as well as the additional funds, as well if there were funds that were obligated but not necessarily something was delivered on by canceling or descoping the contract right now. We can identify that those funds could be essentially returned back to IRS’ pot of available funding.

Terry Gerton And how did your assessment then of the actual savings of these cancel contracts line up with DOGE’s headlines?

LaToya George To be honest, we did not do a dollar for dollar comparison to DOGE’s headlines, but in our review, we took those factors that I just mentioned of what we could identify an actual dollar amount for a cancel obligation or cancel contract versus if you were to just take the total contract value and just say this contract was canceled and say that that the amount saved it wouldn’t tell the full picture. So we wanted to dive deep and make sure that we’re fully listing only the ones that funds could be saved. There are certain contracts such as — I don’t want to get into too much into the details of this contracting world — but something that’s called a blanket purchase agreement. And so for that one, it’s essentially having a charge card account with a high dollar limit. And you aren’t necessarily spending the money, you just have that available funding there. And if that contract is canceled, yes, that available funding is not there, but it wasn’t necessarily saving dollars, if that makes sense. You just didn’t get a chance to use any of those funds. So we did not include that in our analysis of funds saved because we couldn’t say for sure that IRS would have ever even exercised the option to charge against that account, if that make sense.

Terry Gerton I appreciate that clarification. LaToya George is a director in taxpayer services and operational support in the Office of Audit at the Treasury Inspector General for Tax Administration. Let’s now go back to that topic that you said was the focus. Within this set of hundreds of contracts, you were looking at taxpayer services. How did you identify which contracts were going to have an impact on taxpayer-facing services?

        Sign up for our daily newsletter so you never miss a beat on all things federal

LaToya George So we review the contract requirements within the full contract details to identify those that were tied to taxpayer facing operations. We assess how the cancelations could affect those, for example, anything affecting IRS operations of processing returns, enforcing compliance, as well as just customer service interactions, whether that’s on the phone or in person. Examples of those could be expert witness testifying. Those can benefit taxpayers as well as benefit the IRS. But we just identify different services or goods that would impact, like I said, day-to-day interaction for a taxpayer.

Terry Gerton And what stood out to you about that specific collection of contracts and how they were canceled?

LaToya George Well, nothing that we identified for this review, it was truly informational just to identify the depth and span of contracts that were canceled. We did not look at the process the IRS took or the direct impact. That impact isn’t really known yet. It may take a little while of IRS adjusting. They are going to use their current IRS employees to fill in the gaps from any support that was lost from the canceled contracts.

Terry Gerton So you mentioned there that IRS is going to fill in some of the gaps created by these cancelled contracts with current staff members, but we’ve heard a lot about how short the IRS is in staffing, how many people they lost over the course of 2025. Based on what you saw, would you think it’s realistic given current workload and staffing procedures that the IRS would be able to fill those gaps created by the cancel contracts?

LaToya George Honestly, it’s too soon to tell, or at least for this review, we did not dive that deep. The actual impact on taxpayer services remains unknown currently, but I think that IRS is resilient. They have been resilient over the years and they are internally adjusting where they can, getting their employees trained. We have several reviews that looks at the different ways that IRS pivoting. There are some internal Organizational changes and so we will continue to review that and report to your listeners so that they could know as much as we find out

Terry Gerton Well, you did say that this report did not come with recommendations. It was an information-only report. But based on the information provided in this report, how should the IRS, or perhaps even Congress, be watching to see how these decisions play out over time?

LaToya George Well, this filing season that just ended a week ago is going to surely tell some of the impact that is usually the first indication of where you can see where IRS is in need of assistance from Congress through funding, through additional support. So I would suggest for the listeners as well as Congress to just take a look at the impacts on the filing season and taxpayers in general.

Terry Gerton Do you see that being part of the IRS’ consideration in the future, where there are contracts that they are considering cancelation, thinking about how they do impact taxpayers?

LaToya George I can’t opine on that completely. I will say that they have drafted regulations and procedures. At the time of this effort for the Defend the Spend initiative, I can’t say whether they did or did not include that in their consideration. Again, this was a little informational. We just wanted to get kind of the wide eye view of what contracts were canceled and the potential impact. And we did not go in depth about their procedures, whether everything was tracked correctly. We do plan to look at something in the future, or we do plan to consider an audit related to the process for canceling the contracts, as well as making sure that all regulations were followed.

        Read more: Management

Copyright © 2026 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.