IRS Audit Revenue Plunges Following Mass Layoffs, Watchdog Finds

The Treasury Inspector General for Tax Administration (TIGTA) has reported a significant decline in IRS audit revenue following mass layoffs, from $10 billion to $6.5 billion. This drop comes as the agency shed thousands of enforcement workers, leaving it with 17,517 auditors and collectors as of January this year.

Fiscal 2024 saw $10 billion in revenue from audits, while fiscal 2025’s haul was a mere $6.5 billion, a decline of nearly one-third. The IRS’s dwindling workforce is not the only factor contributing to this collapse; the agency has also shifted its priorities. Audits of large corporations and wealthy taxpayers decreased significantly, with new business partnerships plummeting by 30%. Moreover, audits of individual earners with income above $400,000 – a group that was supposed to be under greater scrutiny – saw a significant decline.

The mass layoffs were part of the Trump administration’s “Department of Government Efficiency” initiative. While some argue that technology and artificial intelligence could fill the gap left by human auditors, this is not the case. Technology has improved tax collection in recent years but requires significant investment in training and infrastructure to be effective.

With fewer auditors on hand to scrutinize complex tax returns, the IRS may struggle to keep pace with increasingly sophisticated evasion strategies employed by high-income earners and corporations. The Center on Budget and Policy Priorities estimates that every dollar cut from enforcement loses more than a dollar of revenue, exacerbating the deficit.

The decline in audit revenue has significant implications for President Biden’s economic agenda, which relies heavily on robust tax collection to fund social programs and infrastructure projects. While the IRS collected more total tax revenue in fiscal 2025 ($5.3 trillion, up 4.2% from prior year), this was largely driven by an increase in federal taxes paid by taxpayers rather than a rise in audit revenue.

Policy experts have long warned that continued funding cuts could hobble the IRS’s ability to enforce tax laws effectively. The proposed additional funding cuts for 2027 threaten to leave the agency with fewer resources to tackle complex cases and prevent evasion. As Senator Elizabeth Warren observed, this development is “a dream come true” for high-income earners and corporations that skirt tax laws.

The decline in audit revenue highlights the importance of adequate funding and staffing for the IRS. Tax collection is not just a matter of efficiency or cost-cutting; it’s about fairness, accountability, and ensuring everyone contributes their fair share. The IRS needs sufficient resources to fulfill its core mission.

Lawmakers must now decide whether to heed warnings from policy experts and maintain sufficient funding for the IRS or continue down the path of weakening an already overburdened agency. If we fail to address this crisis, we risk creating a system where tax evasion becomes more prevalent, further widening income inequality and undermining trust in government. The stakes are high; the time for action is now.