IRS audit income drops due to workforce cuts
TL/DR –
IRS revenue from audits dropped by 35% in the fiscal year 2025, and the number of IRS employees in auditing and collections fell by nearly 10,000 from fiscal 2024 to January 2026, according to the Treasury Inspector General for Tax Administration (TIGTA). Despite this, total U.S. tax revenue rose 4.2% to $5.3 trillion in 2025. The report warns that these staffing losses threaten the IRS’s capacity to enforce tax laws, serve taxpayers, and pursue complex cases, potentially increasing the federal deficit.
“`html
Revenue from IRS Audits Experiences a 35% Decrease in 2025
According to the Treasury Inspector General for Tax Administration (TIGTA), the fiscal year 2025 witnessed a 35% dip in audit revenue collected by the Internal Revenue Service (IRS), down to $6.5 billion from the $10 billion reported in the previous year.
Significant Reduction in IRS Auditing and Collection Staff
In the first month of 2026, IRS employees working in auditing and collections were reported to be 17,517 – a significant drop of nearly 10,000 from the figures of fiscal 2024.
This decline in staffing capacity has been a cause of concern, with the watchdog report highlighting the potential threats to the IRS’ ability to enforce tax laws and provide service to taxpayers. It notes that these impacts are likely to increase over time.
Changes in Audit Activity and Tax Revenue
Though the fiscal year 2025 saw a rise in large corporate audits by 17%, the number of new business partnership audits fell by 30%. This decline can be attributed to agency reorganization and delays in training. The audit of individuals with earnings exceeding $400,000 also saw a drop of 26% as the IRS’s Global High Wealth Program experienced a workforce reduction of 27%.
One positive note was that despite the drop in audit revenue, total tax revenue in the U.S. increased by 4.2% to $5.3 trillion in the same year.
Impact of Policy Changes and Budget Cuts
Despite the Biden administration’s previous increases in IRS funding and the objectives of the Inflation Reduction Act to expand enforcement, the auditing capacity of the agency has been jeopardized. Proposals from the Trump administration and budget cuts backed by Republicans pose the risk of further reductions.
Policy experts have expressed concern over the dwindling numbers of IRS revenue agents, which are now at their lowest since the 1950s. They suggest this impedes the agency’s capacity to handle complex cases and collect unpaid taxes, which consequently could lead to an increase in the federal deficit.
“`
—
Read More US Economic News