The Internal Revenue Service experienced a marked reduction in enforcement activity in fiscal 2025 following mass staffing cuts implemented under the Trump administration, according to government data obtained through the Freedom of Information Act. Those changes coincided with a 5% decrease in revenue collected via enforcement actions - nearly $5 billion - for the fiscal year.
The Taxpayer Advocate Service, the IRS’ internal watchdog, reported that the agency opened more than 120,000 fewer tax audits in 2025 than it did the year before. The data indicate that the cuts reached across the agency, including teams responsible for pursuing unpaid taxes.
Most of the money recovered through tax enforcement comes from unpaid balances, and audits can span multiple years, meaning reduced audit starts do not immediately translate into lost revenue but can lower collections over time.
Treasury Department officials told Reuters that enforcement revenue climbed by 12% in the first five months of the 2026 fiscal year, which began on October 1. That uptick is separate from the fiscal 2025 decline and reflects a different reporting window.
The staff reductions followed actions by the Department of Government Efficiency, a cost-cutting agency created by President Donald Trump and led by Elon Musk. That agency directed mass staffing cuts at the IRS that touched nearly every function of the tax agency.
According to IRS budget projections, the agency’s enforcement arm lost roughly 5,000 employees entering 2026 and is slated to cut about 5,000 more in the coming year. Those reductions are part of a broader workforce contraction that reverses an earlier expansion.
Frank Bisignano, the CEO of the IRS and Commissioner of the Social Security Administration, told the Senate Finance Committee that the agency is reviewing the "tax gap" - the difference between taxes owed and taxes collected - to determine what portion is "addressable." He said he would return to the committee with "a plan to drive the number down and you’ll have the resources allocated and the technology" needed to recoup unpaid sums.
The staffing and enforcement changes effectively erase a key achievement from the prior administration, which had directed tens of billions of dollars to the IRS to strengthen scrutiny of large corporations and high-net-worth individuals. At its peak under that initiative, the IRS employed 103,000 people, according to the Treasury Inspector General for Tax Administration.
The IRS now aims to have about 69,000 employees by the start of the 2027 fiscal year on October 1, signifying a substantial reduction from its earlier staffing peak.
Before Congress provided the infusion of funds that expanded the IRS workforce, the agency had long struggled with outdated technology and staffing shortages in part because some Republicans in Congress blocked funding intended to modernize systems and retain skilled personnel. That extended period of constrained resources contributed to a shift in enforcement focus.
The Taxpayer Advocate Service has reported that, as a result of funding and staffing limitations, the IRS moved enforcement activity away from businesses and wealthy individuals and toward lower-income taxpayers, who generally cost less to audit.
"I think that the agency has suffered potentially irreparable harm because it wasn’t as if we were starting off from a system of tax administration that was modernized and set up to pursue compliance on the high end of the income spectrum," said Natasha Sarin, the president and cofounder of the Yale Budget Lab.
The IRS now faces the twin challenges of addressing the reduced enforcement capacity recorded in fiscal 2025 while working within a staffing plan that projects significant further cuts. Agency leaders have signaled intentions to reassess enforcement priorities and to present a plan to the Senate Finance Committee that outlines the resources and technology they consider necessary to reduce the tax gap.
These developments leave open questions about how enforcement outcomes and revenue collection will evolve as the agency implements its staffing and operational plans.