The IRS collected $6.5 billion from audits in fiscal 2025, a 35% drop from $10 billion the prior year, according to a Treasury Inspector General for Tax Administration report released Aug. 26. The sharp decline marks a reversal of the agency’s prior expansion and reflects the impact of massive workforce reductions that began with the Trump administration’s cost-cutting initiatives.
The staffing losses hit the IRS’s examination function hard. The number of employees working in auditing and collections fell to 17,517 as of January 2026, down nearly 10,000 workers from fiscal 2024, the watchdog reported. Overall, the IRS shed roughly 28% of its total workforce since the start of 2025, with the deepest cuts concentrated in enforcement and technology roles.
The audit reductions were widespread. Examinations of individuals earning over $400,000 dropped 26%, falling to about 43,000 cases in fiscal 2025 from a year earlier. The agency’s Global High Wealth program lost 27% of its staff following the workforce cuts. New business partnership audits fell 30% as reorganization efforts delayed training for revenue agents.
The cuts stemmed from cost-reduction efforts by Elon Musk’s Department of Government Efficiency, or DOGE, which pursued workforce reductions through layoffs and incentivized departures. The Treasury watchdog noted that the staffing losses “present a challenge to improving taxpayer service and enforcing the nation’s tax laws,” warning that the full impact “may become more apparent over time” as pending cases close.
The audit revenue decline reverses a prior policy direction. Under the Biden administration, the Inflation Reduction Act directed $80 billion to the IRS to expand enforcement and boost audit revenue from wealthy taxpayers and corporations. The agency had forecast that investment would yield hundreds of billions in additional tax revenue. However, Republican opposition to IRS expansion and the Trump administration’s subsequent workforce reductions have dismantled those gains.
Despite lower audit revenue, the IRS collected more total tax revenue in fiscal 2025 than the prior year, with federal taxes rising to $5.3 trillion, up 4.2% from fiscal 2024, according to the Treasury watchdog. However, experts warn that the audit decline signals a broader erosion of enforcement capacity. The Center on Budget and Policy Priorities noted that “the agency has fewer revenue agents, who audit the most complicated tax returns, than it has had since the 1950s, when the economy was far smaller and the tax code was far less complex.” Tax analysts at the think tank emphasized that “every dollar spent on IRS tax enforcement raises multiple dollars in revenue, which means that every dollar cut from IRS enforcement loses more than a dollar of revenue and adds to the deficit.”
The Trump administration has proposed additional IRS funding cuts for 2027, signaling that further reductions may be ahead. Policy experts have warned that continued budget shrinking could make it harder to collect overdue taxes and pursue tax compliance violations, potentially widening the nation’s tax gap.
Sources
- CBS News — IRS audit revenue drop to $6.5 billion, staffing losses, TIGTA report findings, audits of high-income individuals
- Treasury Inspector General for Tax Administration (TIGTA) — Official Aug. 26 report on IRS audit revenue, staffing levels, and compliance impact
- Peter G. Peterson Foundation (PGPF) — IRS workforce decline of 28% since start of 2025
- Yale Budget Lab — Revenue agent loss of 31% and impact on audit capacity
- Center on Budget and Policy Priorities — Expert analysis on IRS enforcement capacity and revenue multiplier effects
