IRS audit revenue plunged following workforce reductions, watchdog finds

Revenue from IRS audits plummeted by 35% in fiscal 2025, dropping to $6.5 billion from $10 billion in the previous year, according to a report released by the Treasury Inspector General for Tax Administration (TIGTA). This sharp decline coincided with a significant reduction in the number of IRS employees dedicated to auditing and collections, which fell to 17,517 as of January 2026, a decrease of nearly 10,000 workers compared to fiscal 2024. The TIGTA report highlighted that the staffing cuts were part of broader cost-saving measures implemented by Elon Musk’s Department of Government Efficiency (DOGE), which aimed to reduce the federal workforce through layoffs and deferred resignations. These actions led to a dramatic loss of tax auditors, with one-third of them leaving within the first three months of the Trump administration. The report cautioned that while some audit revenue losses might be recoverable as ongoing cases are resolved, the long-term implications of reduced staffing remain a concern for the agency’s ability to enforce tax laws effectively. The shift in audit focus became evident in the numbers. While the IRS launched 17% more large corporate audits in fiscal 2025 compared to the previous year, audits targeting new business partnerships saw a steep decline of 30%. This change was attributed to internal restructuring that disrupted employee assignments and delayed necessary training for revenue agents. Additionally, the agency conducted approximately 43,000 examinations of individuals earning over $400,000, marking a 26% decrease from the prior year. The Global High Wealth program, designed to monitor high-net-worth taxpayers, also faced challenges, with 27% fewer personnel available as of January 2026. Despite these setbacks, the IRS managed to collect more total tax revenue in fiscal 2025 than the previous year, reaching $5.3 trillion, an increase of 4.2%. This growth was partly attributed to improved technological tools and data analysis methods. During congressional testimony in April, IRS Chief Executive Officer Frank Bisignano emphasized the agency’s reliance on artificial intelligence and advanced analytics to detect tax evasion more efficiently. He stated that these innovations enable the IRS to identify high-risk compliance issues with greater precision. Senator Elizabeth Warren, a Democrat from Massachusetts, criticized the staffing reductions as beneficial to high-income earners and corporations that evade taxes. She described the cuts as a “dream come true” for those who avoid paying their fair share, emphasizing the negative impact on working-class citizens who comply with tax obligations. The decline in audit revenue contrasts sharply with plans under the Biden administration, which included a $80 billion funding boost to the IRS via the Inflation Reduction Act. This funding was intended to expand the agency’s capacity to pursue unpaid taxes and enhance enforcement capabilities. However, the Trump administration’s approach to reducing federal spending created uncertainty, with Republican lawmakers expressing concerns that increased scrutiny would fall disproportionately on ordinary Americans. As the situation unfolds, the IRS faces mounting pressure to balance resource constraints with its mandate to uphold tax compliance. With continued staffing reductions and shifting audit priorities, the agency must navigate complex challenges to maintain its effectiveness in collecting revenue and ensuring equitable enforcement of tax laws.