The acting head of the IRS plans to resign after being bypassed over a new agreement to share the tax data of undocumented immigrants with Homeland Security personnel, according to two people familiar with the situation.
Acting IRS commissioner Melanie Krause — the tax agency’s third leader since President Donald Trump’s inauguration — will participate in the deferred resignation program the Trump administration offered to agency employees in recent days, said the people, who spoke on the condition of anonymity for fear of reprisal.
Disagreements over the agency’s direction also factored into Krause’s decision to leave, the people said.
Losing three agency leaders in three months is “unprecedented,” one of the people said. “I don’t think we’ve seen anything like this at IRS.”
Treasury Department officials in recent days sought to circumvent IRS executives so immigration authorities could access private taxpayer information, the people said. Those conversations largely excluded Krause’s input.
Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi L. Noem signed an agreement Monday allowing the practice, although IRS lawyers had counseled that the deal probably violates privacy law. Krause learned of the deal after representatives from the Treasury Department released it to Fox News, the people said.
Krause also felt unable to push back on moves the U.S. DOGE Service was forcing through the tax agency, they said, including dramatic staffing cuts, a technology infrastructure overhaul and long-term IRS priorities.
“She no longer feels like she’s in a position where she can impact the decision-making that’s happening,” said a person familiar with the situation. “And [she believes]that some of the decisions that are being made now are things the IRS can never recover from.”
A Treasury Department spokesperson said Krause led the IRS “through a time of extraordinary change” as it tries to upgrade its technology and carry out other changes to help make government more efficient. “We wish Melanie well on her next endeavor,” the spokesperson said.
Representatives from the White House did not immediately respond to a request for comment.
Krause was the IRS’s chief operations officer before she became acting commissioner on Feb. 28. Her predecessor, Doug O’Donnell, retired rather than clash with DOGE and immigration enforcement officials who wanted broad access to confidential personal taxpayer data.
O’Donnell replaced Danny Werfel, the Biden-appointed IRS commissioner who hoped to remain in office during Trump’s term. But Trump announced plans to fire him and bring on former congressman and auctioneer Billy Long, a six-term Republican lawmaker without experience on tax-writing committees.
The Trump administration has moved aggressively to bring the IRS in line with the president’s priorities. Officials held a recent gathering with tax IT engineers to discuss building a cross-government data-sharing system that would allow agencies to use personal tax information to hunt for fraud in social safety net programs. IRS lawyers warned Krause that the initiative probably violated privacy laws, which prevent the sharing of personal data even with other government agencies.
Monday’s agreement with DHS would permit immigration enforcement officials to obtain highly protected tax information for people the Trump administration hopes to detain and deport. A redacted copy of the memorandum was filed in the U.S. District Court for Washington, D.C., as part of a lawsuit brought by worker and immigrant advocacy groups seeking to block the data-sharing.
The possibility of such an agreement had raised alarms among current and former IRS officials, who said it was a privacy breach and contravened the tax agency’s longtime guarantee that taxpayers suspected of being in the country illegally wouldn’t have their information turned over to immigration enforcement. Undocumented workers’ wages are subject to the same tax withholding and reporting requirements that applies to other U.S. residents.
DHS officials previously suggested they’d ask the IRS for help locating 7 million people. There are about 11 million undocumented immigrants in the United States, according to federal officials’ estimates.
Improper disclosure of tax information is punishable with prison time and hefty fines. Taxpayers whose privacy is violated are entitled to monetary compensation.
Under the terms of Monday’s agreement, Immigration and Customs Enforcement officials must provide the targeted person’s name and address, and the specific reason the disclosure could be relevant to a non-tax-related criminal investigation.
DHS spokeswoman Tricia McLaughlin said the “government is finally doing what it should have all along: sharing information across the federal government to solve problems.”
The memorandum sets out a “clear and secure process to support law enforcement’s efforts to combat illegal immigration,” a Treasury Department spokesperson said.
John Koskinen, who was IRS commissioner under President Barack Obama and Trump, said Krause’s situation shows that the Trump administration has “no qualms” about interfering at the tax agency. It is “unheard of that you would try to manage the agency from the Treasury Department,” he said.
Krause is the latest executive to leave the IRS amid a broad leadership shake-up. Employees who accept the deferred resignation offer are set to leave the agency on April 28, roughly two weeks after the April 15 tax-filing deadline.
Dozens of IT and cybersecurity officials have been placed on leave. About 7,000 employees were laid off in February, with more cuts announced last week.
The administration plans to slash the agency’s head count by about 25 percent compared with where it was in January, as part of the White House’s effort to shrink the size of the federal government.
