Between now and when tax returns are due in the coming months, the IRS or the Department of Justice’s Tax Division often issue a press release about someone pleading guilty to or being convicted of a tax crime and facing jail time. If the story makes local news, then someone may think twice before claiming that questionable write off.
But a new report from an IRS oversight agency states that collection and enforcement revenue is down due to staff reductions.
The Treasury Inspector General for Tax Administration (TIGTA), reported that tax revenue from enforcement was reduced from $98.7 billion in 2024 to $93.8 billion in 2025. Of that amount, revenue collected at the conclusion of tax audits dropped from $10 billion in 2024 to $6.5 billion in 2025.
So what caused the revenue decline? Immediately after President Donald Trump took office for the second time, he along with Elon Musk’s Department of Government Efficiency (DOGE) implemented a hiring freeze on all executive departments, including the IRS. The freeze did not apply to military and public safety personnel and immigration enforcement.
Collection and audit staff was reduced from 27,217 employees in 2024 to 17,517 in January 2026. Some employees took early retirements, and all probationary employees were terminated. This has resulted in a pause in some audits.
In addition to staff reduction, enforcement policies changed. For example, under the Biden administration, there was a policy to increase audits of taxpayers earning more than $400,000 per year. In fiscal year 2024, there were 58,000 audits of such taxpayers. In 2025, the number of audits was reduced to 43,000.
In another restructuring move, the Large Business and International Division redirected their audit staff to process the large number of Employee Retention Credit claims which was claimed during the COVID pandemic.
So what is to make of all of this? As mentioned above, IRS enforcement revenue decreased by $4.9 billion from 2024 to 2025. During that time, the IRS cut 7,605 employees; assuming a very high but plausible estimate of a $100,000 per year salary per employee, that would mean payroll savings of $760.5 million, perhaps more if benefits are also counted. As a matter of optics, losing $4.9 billion to save $760.5 million makes no financial sense. The TIGTA report warned that the downstream effects of these reductions are likely to become more apparent over time.
While the decrease in enforcement revenue is concerning, it is a small portion of overall tax revenue. Taxpayers paid $5.3 trillion in taxes in fiscal year 2025 which is a 13.2% increase from 2023.
Similarly, the decrease in audit revenue from $10 billion in 2024 to $6.5 billion in 2025 is also notable. But most people generally do not have money available to pay a post-audit tax immediately. So they wait until the case goes to collections where taxpayers set up an installment agreement or in some cases settle through an offer in compromise where they settle their tax debt for less than they owe.
So does this mean that regular taxpayers can play fast and loose with tax law? Absolutely not. Ignore the social media tax “advice” where they tell you not to worry about being audited. While the audit rate is relatively small, the chances go way up if you claim unusually large deductions. The IRS has seen enough of these suspicious returns to flag them. Just be honest with the reporting, and have documentation to back up any expenses if necessary.
If you cannot pay the tax due, work with the IRS and set up an installment agreement. If you are really in financial straits, you can ask the IRS collection staff to put you on currently noncollectible status, which may require an examination of your finances. If you ignore the letters, penalties and interest will increase and, eventually, the IRS may resort to painful actions like bank levies and wage garnishments.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.
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