FY 2025 IRS Audit Revenue Dropped by 35%
TL/DR –
Revenue from IRS audits dropped 35% between fiscal years 2024 and 2025, from $10.0 billion to $6.5 billion, due to staff reductions in the agency. The IRS’s examinations and collection staff decreased by 36%, from 27,217 employees to 17,517, during this period. However, despite the decrease in audit revenue, taxpayers paid a record-high $5.3 trillion in total tax revenue in FY 2025.
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Staff Reductions Cause IRS Audits Revenue to Plummet
The Internal Revenue Service (IRS) experienced a significant fall in revenue from audits between the fiscal years 2024 and 2025. This drop is primarily attributed to the staff cuts that the agency underwent in 2025, as per a report by an IRS watchdog.
Notable Findings by the U.S. Treasury Inspector General for Tax Administration
In its report, the U.S. Treasury Inspector General for Tax Administration (TIGTA) discovered that the revenue from examinations tumbled by 35% between FY 2024 and 2025, moving from $10.0 billion down to $6.5 billion. In addition, the number of newly initiated audits on individual tax returns also saw a decrease of 30% during the same period.
IRS Losses in Staff and Revenue
These findings are less surprising when considering 2025 was a particularly unsteady year for the IRS. TIGTA data reveals the agency saw a loss of nearly 36% of its examinations and collections personnel between FY 2024 and January 10, 2026. This led to a reduction in staff numbers from 27,217 to 17,517. Currently, the IRS’s examinations and collection staff is still approximately 13% smaller than its size in FY 2023, before the IRS used $3.38 billion from the Inflation Reduction Act (IRA) to recruit additional employees. TIGTA warns that the impact of these reductions will likely be felt more strongly over time.
Revenue Decline in Enforcement Operations
Across all enforcement operations, the IRS saw a 5% decrease in revenue from FY 2024 to 2025, with earnings dropping from $98.7 billion to $93.8 billion. During this period, collections revenue only fell by 0.4% and was actually up by 17% compared to FY 2023. TIGTA attributes this increase to the resumption of automated collection notices, which were halted intermittently due to the pandemic. “For example, the IRS sent approximately 3.2 million of these notices to individual taxpayers in 2025, after sending no notices in FY 2023,” TIGTA stated.
Future Outlook for the IRS
Unfortunately, the IRS may not see a boost in audit revenues anytime soon. The IRA funds allocated for enforcement became exhausted in December 2025. The situation is further complicated as the House Appropriations Committee proposes a FY 2027 budget for the IRS that includes a cut of almost $1.4 billion from enforcement. On top of this, the Treasury Department has advised that the IRS should reduce its workforce by an additional 2,000 employees, primarily in the enforcement sector.
Changes in Tax Revenue
Business tax revenue saw a 14% drop between FY 2024 and FY 2025, while revenue from individual income taxes witnessed a 9% surge during the same timeframe. Despite these variances, taxpayers made a record payment of $5.3 trillion in total tax revenue in FY 2025. TIGTA reports this figure as “the most tax revenue ever paid, without adjusting for inflation.”
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