Why did Trump replace Gary Shapley as acting IRS commissioner days after appointing him?

President Donald Trump has abruptly replaced Gary Shapley as acting commissioner of the Internal Revenue Service (IRS) just days after his appointment, following internal friction within the administration and mounting concern from Treasury leadership. The decision marks another flashpoint in the Trump administration’s contentious reshaping of federal agencies and reflects growing tensions over the influence of Elon Musk and the Department of Government Efficiency (DOGE) in government staffing.

The move was confirmed on Friday in a statement by Treasury Secretary Scott Bessent, who announced that Michael Faulkender, the current Deputy Treasury Secretary, will assume the role of acting IRS commissioner effective immediately. Bessent’s announcement signals a significant course correction just as the IRS prepares for sweeping internal changes and a possible 40% workforce reduction under DOGE’s controversial streamlining agenda.

What led to Shapley’s ouster from the IRS?

According to multiple sources familiar with the decision, Shapley’s short-lived tenure was cut short due to a behind-the-scenes power struggle between Bessent and allies of Elon Musk. Shapley, a senior IRS investigator known for his involvement in high-profile whistleblower disclosures related to Hunter Biden’s tax affairs, was reportedly installed as acting commissioner without Bessent’s prior knowledge or approval.

This backdoor appointment, allegedly pushed by Musk-aligned officials in DOGE, appears to have bypassed traditional vetting protocols and set off alarm bells within the Treasury Department. Bessent reportedly viewed Shapley’s installation as a breach of protocol and a challenge to departmental authority, prompting immediate intervention to reverse the decision.

While no official explanation has been provided beyond the personnel change, sources suggest Bessent acted to assert control over IRS leadership decisions and prevent the agency from becoming entangled in politically charged controversies. Shapley’s departure also highlights ongoing concerns about undue influence from outside stakeholders in federal personnel management during Trump’s second term.

Who is Michael Faulkender and what does his appointment signal?

Michael Faulkender, who now steps into the role of acting IRS commissioner, previously served as Assistant Secretary of the Treasury for Economic Policy during Trump’s first term and returned to government in 2025 as Deputy Treasury Secretary. He is a seasoned economist and policy advisor with strong ties to conservative fiscal thought leadership.

His appointment is seen by administration insiders as an effort to stabilize the IRS at a time when trust in the agency’s leadership has been shaken. Faulkender is expected to align closely with Bessent’s priorities, focusing on restoring operational continuity and ensuring that any reforms introduced by DOGE are subject to financial and legal review.

The decision also signals a pivot away from personalities associated with internal dissent or public controversy. With Shapley’s removal, the Treasury appears to be asserting a firewall against politicization within the IRS as the agency heads into a period of intense scrutiny and restructuring.

What are the broader implications for IRS restructuring under Trump?

The leadership churn at the IRS is part of a broader shakeup of federal agencies under the Trump administration’s second-term agenda, which includes aggressive cost-cutting and efficiency measures championed by DOGE. Reports indicate that the IRS could see up to 40% of its workforce laid off under proposed budget streamlining—a target that has triggered backlash from current and former employees, unions, and watchdog groups.

The internal drama around Shapley’s appointment has amplified concerns that the IRS is becoming a political battleground, with critical decisions being influenced by private actors like Musk rather than career officials or congressional oversight. The latest personnel change may provide short-term relief for those pushing for institutional integrity, but it also reinforces the volatility at the top of one of the government’s most important revenue agencies.

How are markets and political observers reacting?

While the IRS does not trade publicly, leadership volatility in such a central agency can affect public confidence in tax administration and fiscal policy execution. Political observers have warned that repeated changes in top IRS leadership—this being the fourth such change in 2025—could disrupt implementation of critical tax reforms or delay enforcement actions.

There are also broader implications for Trump’s governance style. Analysts note that Trump’s second term has seen a marked increase in direct intervention in agency leadership and a heavier reliance on loyalty-driven appointments. Shapley’s abrupt removal reflects both the power dynamics within the Trump cabinet and the growing role of private-sector influencers like Elon Musk in federal decision-making.

What’s next for Shapley and Faulkender?

Shapley has not issued a public statement regarding his removal, but it is likely he will remain a high-profile figure given his whistleblower background and previous testimony before Congress. Political allies may attempt to frame his ouster as retaliation or politicization, adding further fuel to the ongoing debate over IRS independence.

Faulkender, on the other hand, will be tasked with managing not only agency operations but also the optics of IRS reform. His ability to navigate political crosscurrents while maintaining staff morale and regulatory compliance will be closely watched by lawmakers and the public.

With the IRS facing an existential moment and the Trump administration under constant pressure to demonstrate both efficiency and integrity, the latest leadership shift raises questions about where federal tax enforcement is headed—and who will be steering the ship.