WASHINGTON, D.C. — In a major shake-up at the Internal Revenue Service, Holly Paz, a longtime IRS official and close ally of former Obama-era bureaucrat Lois Lerner, has been officially terminated following an internal review, Fox News Digital has learned from multiple sources. Paz, who most recently served as the Commissioner of the Large Business and International Division, had been placed on administrative leave last month amid renewed scrutiny over her past involvement in one of the most notorious IRS scandals in modern American history.
Paz, once Lerner’s deputy, played a key role in the IRS’s now-infamous targeting of conservative and Tea Party-affiliated groups during the Obama administration. Back in 2013, revelations emerged that IRS officials were deliberately applying extra scrutiny to tax-exempt applications from groups that included terms like “Tea Party,” “9/12,” and “Constitution” in their names — all clear indicators of conservative political alignment.
The scandal triggered nationwide outrage and led to multiple investigations, including by the Treasury Department’s Inspector General, who confirmed the IRS had used “inappropriate criteria” to target groups based on political viewpoints. Paz was seen as a critical link between the IRS’s Cincinnati office — where applications were initially screened — and Washington, D.C., headquarters, where key decisions were made.
While the Obama administration downplayed the scandal at the time, conservative watchdogs and lawmakers viewed it as a blatant example of political weaponization of a powerful federal agency. After years of legal battles, the Trump administration reached a settlement in 2017 with dozens of conservative groups, and the IRS issued a rare admission of guilt and public apology, acknowledging that its actions were “wrong.”
“For such treatment, the IRS expresses its sincere apology,” the agency stated in the settlement. The apology also admitted the agency had subjected groups to “inordinate delays” and requested information that was “unnecessary.”
Paz’s recent firing appears to be part of a broader push by Acting IRS Commissioner Scott Bessent to clean house and restore credibility to an agency long plagued by allegations of partisan misuse. Bessent, a prominent investor and critic of government overreach, has been working closely with IRS leadership and whistleblowers, including Gary Shapley and Joseph Ziegler — both of whom raised alarms about politically motivated conduct within the agency, particularly in investigations related to Hunter Biden.
Sources close to the matter say that Bessent and his team are focused on undoing structural remnants of the Biden administration’s controversial expansion of IRS enforcement capabilities. This includes reviewing staffing levels, improving customer service, and modernizing outdated systems — while ensuring that the agency no longer operates as a political cudgel.
Paz’s final assignment under Biden-appointed Commissioner Danny Werfel was to lead a newly formed division tasked with auditing so-called “pass-through” businesses — many of which are run by conservative small-business owners and entrepreneurs. Werfel publicly claimed the initiative would “hold the nation’s wealthiest filers accountable,” while Paz called the assignment an “important change” in IRS operations.
However, critics saw the unit as yet another attempt to target the political and economic right under the guise of tax enforcement. Lawmakers raised red flags, prompting an internal review that ultimately led to Paz’s dismissal.
Notably, both Paz and Lerner had previously petitioned federal courts to keep their testimonies in the Tea Party targeting case sealed indefinitely, citing fear of public backlash and death threats — a move widely criticized by conservatives who saw it as an attempt to dodge accountability.
The Department of the Treasury has declined to comment on Paz’s firing. But insiders suggest that her removal is just the beginning of a wider effort to root out the embedded partisanship that has tainted the IRS’s image since the Obama years.
As calls to “de-weaponize” federal agencies grow louder across the political spectrum — especially among conservatives who bore the brunt of past abuses — Paz’s termination may signal a long-overdue return to transparency and fairness in tax enforcement.
