The IRS collected $3.5 billion less from audits in fiscal 2025 after shedding nearly 10,000 enforcement workers, a collapse that the agency's own inspector general warns threatens Washington's ability to enforce federal tax law.
A report from the Treasury Inspector General for Tax Administration, dated August 26, found that IRS audit revenue fell from $10 billion in fiscal 2024 to $6.5 billion in fiscal 2025, a 35 percent decline that tracked directly with deep staffing cuts driven by the Department of Government Efficiency. By January 2026, only 17,517 IRS employees remained in auditing and collections, down almost 10,000 from the prior fiscal year.
The numbers tell a straightforward story. Fewer agents opened fewer cases, and the government brought in far less money. That matters because every serious analysis, left, right, and nonpartisan, agrees that IRS enforcement creates more revenue than it costs. The question is whether the cuts went too deep, too fast, and hit the wrong targets.
The TIGTA report revealed a split in how the shrinking workforce affected different categories of taxpayers. The IRS actually initiated 17 percent more large corporate audits in fiscal 2025 than the year before. But audits of individuals earning more than $400,000 dropped 26 percent, to roughly 43,000 examinations. Audits of new business partnerships, often used as tax-planning vehicles by high earners, fell 30 percent.
The IRS's Global High Wealth program, which targets the most complex returns filed by the richest Americans, had 27 percent fewer employees as of January 2026 than it did before the fiscal 2025 workforce reductions began.
That pattern should concern anyone who wants the tax code enforced fairly. Conservatives rightly objected when the Biden administration's $80 billion IRS expansion looked like it would unleash auditors on middle-class families and small businesses. Republican lawmakers cut billions from that funding for exactly that reason. But the goal was never to give the wealthiest filers a free pass. It was to make sure enforcement resources targeted actual fraud and evasion, not hassled ordinary taxpayers.
The TIGTA data suggests the cuts overshot. The agency shed staff so fast that it lost capacity where it mattered most: examining the complex returns that create the biggest recoveries.
When CBS News reported on the TIGTA findings, the IRS pointed to testimony its CEO, Frank Bisignano, delivered before the Senate Finance Committee in April. Bisignano told lawmakers the agency was adapting:
"Our advanced data and analytic strategies allow us to catch instances of tax evasion that would have been undetectable just a few years ago."
He added that the IRS was deploying artificial intelligence and advanced analytics to pinpoint noncompliance and fraud "with greater accuracy." That sounds promising on paper. In practice, the fiscal 2025 numbers show the opposite result. Whatever efficiencies AI may eventually deliver, they did not prevent a $3.5 billion drop in audit collections over a single year.
Technology can sharpen enforcement, but it cannot replace the revenue agents who actually open cases, review filings, and bring audits to resolution. TIGTA made that point bluntly in its report:
"These losses present a challenge to improving taxpayer service and enforcing the nation's tax laws."
The inspector general added a warning that the full damage may not yet be visible, noting that the impact of staff reductions may "become more apparent over time."
One detail in the TIGTA report undercuts any argument that the revenue drop reflects a smaller tax base. Federal taxes paid by taxpayers actually rose to $5.3 trillion in fiscal 2025, up 4.2 percent from the prior year. The economy grew. Taxpayers paid more. And the IRS collected $3.5 billion less from enforcement.
That gap represents money owed to the Treasury by people and entities that did not pay what they owed, and got away with it because nobody was left to look. In a year when compliant taxpayers sent Washington more money than ever, the cheats caught a break.
Tax analysts at the Center on Budget and Policy Priorities, a nonpartisan think tank, warned about this trajectory in a June blog post. They noted that the IRS now has fewer revenue agents, the specialists who handle the most complex audits, than it has had since the 1950s, "when the economy was far smaller and the tax code was far less complex."
The think tank's analysts also cited research showing that every dollar spent on IRS enforcement raises multiple dollars in revenue:
"Every dollar cut from IRS enforcement loses more than a dollar of revenue and adds to the deficit."
The workforce reductions flowed from DOGE's broader campaign to slash the federal payroll through layoffs and deferred-resignation offers. An earlier TIGTA finding reported that the IRS lost one-third of its tax auditors in just the first three months of the Trump administration. A major IRS reorganization compounded the problem by shifting employees across divisions and delaying training for revenue agents who handle the most complicated returns.
Conservatives have every reason to support a leaner, more efficient federal government. Bloated agencies waste taxpayer money, and the pre-DOGE IRS was no model of good management. But efficiency means getting more output per dollar, not just spending fewer dollars. When enforcement cuts cost the Treasury more in lost revenue than they save in salaries, the math does not work. The deficit grows, and honest taxpayers subsidize the people gaming the system.
Sen. Elizabeth Warren seized on the report to press a familiar Democratic argument. She told CBS News:
"Gutting the IRS is a win for wealthy tax cheats and a loss for working people who play by the rules."
Warren's framing is predictable, and her party's $80 billion IRS spending spree under the Inflation Reduction Act deserved the skepticism it received. Early IRS forecasts in 2024 projected that the new funding would create "hundreds of billions of dollars" in additional revenue, projections that were never tested because Congress pulled back the money. But Warren's core point, that fewer auditors means less accountability for wealthy filers, lines up with what TIGTA found.
The Trump administration has proposed additional IRS funding cuts for fiscal 2027. The Treasury Department did not respond to CBS News's request for comment on the TIGTA findings.
TIGTA's warning was direct. The inspector general said the office is "concerned about how staffing losses are impacting the IRS's ability to ensure that it meets department priorities." If the next round of cuts follows the same pattern, deep reductions in enforcement staff with no plan to maintain audit capacity, the revenue losses will compound.
Cutting government waste is a conservative principle. So is making sure everyone pays what they owe. When the IRS cannot do its job, the people who play by the rules pick up the tab for the people who don't, and that is not a win for anyone except the cheats.