IRS Audit Revenue Fell 35% to $6.5 Billion After Agency Lost Nearly 10,000 Enforcement Workers

The IRS collected $6.5 billion from audits in fiscal 2025, down 35% from $10 billion the year before, according to an Aug. 26 report from the Treasury Inspector General for Tax Administration (TIGTA), the agency's independent watchdog.

The drop tracks almost exactly with who left the building. TIGTA found the IRS had 17,517 employees working in auditing and collections as of January 2026, a decline of nearly 10,000 workers from fiscal 2024. TIGTA had previously reported that the agency lost roughly a third of its tax auditors in the first three months of President Trump's second term, a reduction driven by Elon Musk's Department of Government Efficiency through layoffs and deferred resignation offers.

Where the cuts landed hardest

Not every category of audit shrank. The IRS actually opened 17% more large corporate audits in fiscal 2025 than the year before, according to CBS News's reporting on the TIGTA findings. But audits of new business partnerships fell 30%, which TIGTA attributed to a reorganization that shifted staff around and delayed training for revenue agents.

Audits of individuals earning more than $400,000 a year dropped 26%, with about 43,000 such examinations opened, down from the prior year. The agency's Global High Wealth program, which targets the richest taxpayers, had 27% fewer employees as of January 2026 than it did before the fiscal 2025 cuts. TheAccountant-online, citing the New York Times, reported the IRS also opened 30% fewer individual audits overall, and that one operational unit froze new audits for six months because officials weren't sure they had enough staff to handle the caseload.

An agency that audits fewer wealthy taxpayers and pauses enforcement in some divisions is an agency where high earners have a better shot at getting away with underpaying. TIGTA itself warned that "these losses present a challenge to improving taxpayer service and enforcing the nation's tax laws," and said the fallout "may become more apparent over time" since audits often take years to close.

The AI answer, and its gaps

The IRS's response leans heavily on technology. IRS Commissioner Frank Bisignano told Congress in April that "our advanced data and analytic strategies allow us to catch instances of tax evasion that would have been undetectable just a few years ago," and said the IRS is using AI and analytics to flag high-risk noncompliance with "greater accuracy."

Smarter targeting means fewer wasted audits and more efficient use of a smaller workforce, which is exactly the kind of government efficiency conservatives have pushed for years. But theaccountant-online, drawing on the New York Times, reported that administration officials have not released comprehensive public plans detailing how AI will actually replace the labor-intensive work fewer humans are now doing. TIGTA's own framing, that impacts "may become more apparent over time," suggests the technology hasn't yet proven it can offset the staffing loss.

The bigger revenue picture

Despite the audit slide, the IRS still hauled in a record $5.3 trillion in total tax revenue in fiscal 2025, up 4.2% from the year before, per TIGTA's figures. Collections from routine tools like mailed notices and phone follow-ups on unpaid taxes held roughly steady, according to Newser's summary of the report, and the IRS resumed several compliance programs that had been paused during the pandemic.

Newser also noted, citing Bloomberg, that enforcement actions bring in only a small share of the IRS's total revenue to begin with, and that the agency estimates about $700 billion in legally owed taxes goes uncollected every year regardless of audit levels. The $3.5 billion drop in audit revenue is real money, but it's a rounding error against a $5.3 trillion total and a $700 billion tax gap that predates these cuts.

Political Wire and Yahoo News both amplified the same underlying New York Times reporting on the TIGTA numbers rather than adding independent findings, and the coverage across outlets lines up on the core figures: $10 billion to $6.5 billion, roughly 10,000 fewer enforcement staff, and a 26% drop in high-income audits.

Unresolved is whether the AI tools the IRS is touting will actually close the gap TIGTA identified, or whether the agency is simply collecting less from people who can afford to fight back. The Treasury Department did not respond to requests for comment on the report, and no detailed technology rollout plan has been made public. Congress will get another look at the numbers when TIGTA issues its next audit-cycle report, expected to cover fiscal 2026 staffing levels after further proposed reductions.