Pull to refresh
Logo
Daily Brief
Following Why Sign Up
IRS audit revenue falls sharply after staffing cuts

IRS audit revenue falls sharply after staffing cuts

Money Moves

Treasury watchdog links enforcement decline to loss of nearly a third of examination staff

September 2nd, 2026: NPR and major outlets cover TIGTA findings

Overview

Updated Sep 5

In fiscal 2024, IRS audits brought in $10 billion. In fiscal 2025, they brought in $6.5 billion—a 35% drop documented by the Treasury Inspector General for Tax Administration (TIGTA) in an August 2026 report. The decline tracks a federal workforce reduction effort that cut the agency's examination and collection staff by more than 25% in a single year.

The loss compounds the so-called tax gap—the more than $700 billion in owed taxes that go uncollected annually, per the Yale Budget Lab. The group projects the staffing cuts will reduce federal revenue by nearly $600 billion over the 2026-2035 window. Total tax payments still hit a record $5.3 trillion in fiscal 2025, but enforcement capacity is shrinking at the moment it matters most.

Why it matters

Every dollar cut from IRS enforcement costs roughly $13 in uncollected taxes, widening the federal deficit.

Questions about this story

Free account needed to ask — your question is kept and asked for you right after sign-up. Answers are public.

No questions yet — be the first to ask.

Key Indicators

35%
Decline in audit revenue, fiscal 2024 to 2025
Audit collections fell from $10 billion to $6.5 billion.
17,517
Examination and collection staff as of January 2026
Down from 27,217 at the end of fiscal 2024.
25%
Total IRS workforce reduction by September 2025
More than 25,000 employees retired, resigned, or were terminated.
$600B
Projected revenue loss from staffing cuts, 2026-2035
Yale Budget Lab estimate based on IRS return on enforcement investment.
$93.8B
Total IRS enforcement revenue, fiscal 2025
Down from $98.7 billion in fiscal 2024, a historic high.

Voices

Curated perspectives — historical figures and your fellow readers.

Ever wondered what historical figures would say about today's headlines?

Sign up to generate historical perspectives on this story.

Log in Sign Up

People Involved

Donald Trump
Donald Trump
President of the United States
Oversaw federal workforce reductions beginning January 2025
 Elon Musk
Elon Musk
Leader, Department of Government Efficiency (DOGE)
Oversaw federal cost-cutting initiative targeting IRS workforce

Organizations Involved

Internal Revenue Service
Internal Revenue Service
Federal tax agency
Operating with reduced enforcement capacity

The federal agency responsible for collecting taxes and enforcing tax law.
Treasury Inspector General for Tax Administration (TIGTA)
Treasury Inspector General for Tax Administration (TIGTA)
Federal Watchdog
Monitoring IRS operations and reporting enforcement declines

Independent watchdog auditing IRS programs and operations.
The Budget Lab at Yale
The Budget Lab at Yale
Policy Research Center
Modeling fiscal impact of IRS staffing and funding cuts

Nonpartisan policy research center studying fiscal and economic policy.

Timeline

August 2022 September 2026

13 events Latest: September 2nd, 2026 · 2 months ago Showing 8 of 13
Tap a bar to jump to that date

  1. NPR and major outlets cover TIGTA findings

    Latest Media

    National coverage highlights IRS staff cuts leading to uncollected taxes.

  2. TIGTA reports 35 percent audit revenue decline

    Report

    Watchdog documents enforcement decline in fiscal 2025 compliance study.

  3. Congress appropriates $11.2 billion for IRS

    Funding

    Enforcement allocation falls 8 percent from fiscal 2025 levels.

  4. Examination and collection staff falls to 17,517

    Metric

    Staffing drops from 27,217 at end of fiscal 2024 to 17,517.

  5. IRA enforcement funding fully exhausted

    Funding

    Final supplemental enforcement monies were spent during fiscal 2026's first quarter.

  6. IRS workforce down 25 percent

    Metric

    Over 25,000 employees retired, resigned, or were terminated during fiscal 2025.

  7. Collection and examination effects begin

    Operations

    IRS officials report workforce reduction impacts on collections operations from March onward.

  8. DOGE workforce reductions begin at IRS

    Policy

    Deferred resignation offers and probationary terminations reduce IRS staff sharply.

  9. Trump implements federal hiring freeze

    Policy

    Presidential memorandum halts hiring and starts early retirement initiatives.

  10. FY2024 enforcement revenue hits record $98.7 billion

    Metric

    Audit revenue peaks at $10 billion as staffing and collections peak.

  11. IRS restarts automated collection notices

    Operations

    Agency resumes sending nonfiler and balance-due notices paused during the pandemic.

  12. IRS begins major hiring push

    Operations

    Agency expands examination and collection staff using IRA funding.

  13. Inflation Reduction Act allocates $80 billion to IRS

    Legislation

    Congress approved major IRS funding to rebuild enforcement capacity and reduce the tax gap.

Scenarios

1

IRS audit revenue falls further in fiscal 2026

Likely Resolves by Aug 31, 2027

Discussed by: Treasury Inspector General for Tax Administration; The Budget Lab at Yale

With IRA enforcement funding exhausted and the January 2026 appropriation cutting $400 million from enforcement, staffing losses continue. TIGTA's fiscal 2026 report would show audit collections falling below the $6.5 billion posted in fiscal 2025. The Budget Lab projects each additional staffing reduction compounds the revenue gap, potentially pushing the decade-long revenue loss above $600 billion.

2

Congress restores IRS enforcement funding

Unlikely Resolves by Jan 31, 2027

Discussed by: The Budget Lab at Yale; tax policy analysts at the Urban-Brookings Tax Policy Center

The political calculus shifts when deficit hawks acknowledge the math: each dollar cut from IRS enforcement costs roughly $13 in lost revenue. Congress reverses the January 2026 appropriations cut in the fiscal 2027 cycle and restores hiring authority for examination and collection positions. The Budget Lab's net-deficit analysis—showing $861 billion in combined deficit increase from staffing and budget cuts—becomes the basis for reinstatement arguments.

3

Enforcement stabilizes at a lower plateau

Possible Resolves by Aug 31, 2027

Discussed by: Journal of Accountancy; TIGTA analysis

Staffing attrition slows as the remaining workforce stabilizes, and targeted hiring fills the most critical gaps. Audit revenue plateaus near the fiscal 2025 level, roughly 30 to 40 percent below the fiscal 2024 peak. Collection revenue from automated notices continues partially offsetting the audit decline, keeping total enforcement revenue flat. The tax gap persists at an elevated level but stops growing.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2011-2018

Post-2010 IRS budget cuts (2011-2018)

Congress reduced the IRS budget roughly 20 percent from its 2010 peak, even as the agency took on new responsibilities under the Affordable Care Act and foreign account reporting rules. Audit rates for wealthy taxpayers and corporations fell to historic lows.

Then

Enforcement revenue declined relative to the tax base, and the tax gap widened as audit coverage dropped.

Now

The IRS entered the pandemic with degraded capacity, a backlog problem, and the lowest audit rates in decades.

Why this matters now

The current staffing cuts replicate the post-2010 pattern at a faster pace: reduced capacity leads to fewer audits, which leads to more uncollected tax.

1998-2000

1998 IRS Restructuring and Reform Act

After contentious Senate hearings on alleged IRS abuses, Congress passed the Restructuring and Reform Act, shifting the agency toward taxpayer rights. The law created new procedural requirements and shifted enforcement priorities.

Then

Audit rates fell sharply in the following years as the agency restructured its enforcement approach.

Now

Research later linked the enforcement decline to a measurable increase in the tax gap, particularly among high-income filers.

Why this matters now

Shows that policy-driven reductions in enforcement capacity produce measurable, long-lasting revenue effects—exactly what TIGTA is now documenting.

Sources

(11)
+5
NPR Oversight.gov / TIGTA CBS News Bloomberg Tax Journal of Accountancy The Budget Lab at Yale NCIJ Network Above the Law Urban-Brookings Tax Policy Center Newser Peter G. Peterson Foundation