IRS Audit Revenue Just Collapsed 35%—And Thousands of Enforcement Jobs Are Gone, Treasury Watchdog Finds

The revenue attributed to the Internal Revenue Service’s examination function fell 35% in fiscal 2025 to $6.5 billion as the agency’s enforcement workforce declined, according to a report by the Treasury Inspector General for Tax Administration.

The report said workforce reductions began affecting enforcement activity during fiscal 2025, with the effects potentially becoming more apparent over time.

IRS Examination Activity Declines

The IRS had 27,217 employees working in its Examination and Collection functions in fiscal 2024. That number fell to 19,612 in fiscal 2025, a 27% decline, and stood at 17,517 as of Jan. 10, 2026.

The report found that examination starts declined 30% in fiscal 2025 compared with fiscal 2024. Examinations of individuals with income above $400,000 declined 27%. Large corporation examination starts increased 7% from fiscal 2023 to fiscal 2025, reaching 1,491 in fiscal 2025, while partnership examination starts fell 76% from 6,709 to 1,589.

The IRS also initiated 3.16 million nonfiler notices in fiscal 2025, compared with none in fiscal 2023. Collection function revenue increased 17% from fiscal 2023 to fiscal 2025, largely as automated collection notices resumed after pandemic-related pauses.

The Treasury watchdog said, "These losses present a challenge to improving taxpayer service and enforcing the nation’s tax laws." It added, "We are concerned about how staffing losses are impacting the IRS’s ability to ensure that it meets department priorities."

The IRS did not immediately respond to a request for comment.

Workforce Cuts Raise Enforcement Concerns

The findings follow warnings about the effect of IRS workforce reductions on enforcement. Former acting IRS Commissioner Douglas O’Donnell previously said the effects of the cuts were more likely to become visible over time.

"I’ve been very concerned with the ability of the agency to carry out on its mission, whether it’s at the services level or enforcement level, but also just in general to be a functioning federal government agency going forward," O’Donnell said.

O’Donnell also said, "In the large corporate space, just over time, losing employees, you just basically reduce what you can get to, and you cover less of it." He added, "Over time, that diminishes the ability of leaders in the IRS to have confidence that taxpayers are complying because you’re not getting to a large enough number of them to be sure about that."

Earlier government data showed enforcement revenue fell 5%, or nearly $5 billion, in fiscal 2025, while the IRS opened more than 120,000 fewer audits. The enforcement division also lost roughly 5,000 employees heading into 2026.

Tax Revenue Still Reached $5.3T

Despite the decline in Examination revenue, total federal tax revenue paid to the IRS rose to $5.3 trillion in fiscal 2025, up 4.2% from fiscal 2024.

IRS CEO Frank Bisignano pointed to technology and artificial intelligence as tools for improving enforcement during congressional testimony in April. "Our advanced data and analytic strategies allow us to catch instances of tax evasion that would have been undetectable just a few years ago," Bisignano said. "Along those lines, the IRS is using artificial intelligence (AI) and advanced analytics to identify high-risk areas of non-compliance and fraud with greater accuracy," according to CBS News.

The TIGTA report said the Inflation Reduction Act provided $3.8 billion for enforcement, which was exhausted by Dec. 31, 2025. Congress appropriated $11.2 billion to the IRS in January 2026, including $5 billion for enforcement, 8% below the fiscal 2025 enforcement allocation.

Sen. Elizabeth Warren (D-Mass.), said the workforce reductions were a "dream come true" for high-income earners and corporations that avoid taxes. "Gutting the IRS is a win for wealthy tax cheats and a loss for working people who play by the rules," Warren said in a statement to CBS News.

The TIGTA report made no recommendations. IRS officials were given an opportunity to review the report and agreed with its facts and conclusions before issuance.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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