The Internal Revenue Service has lost thousands of enforcement staffers since President Donald Trump returned to office, and the administration’s proposed fiscal 2027 budget would shrink its team of examiners even further. The cuts are fueling fears, and in some cases, hopes, that the agency’s capacity to enforce U.S. tax laws is diminished, according to The Wall Street Journal. 

The IRS began January 2025 with about 103,000 employees, then lost more than 25,000 workers by May, including roughly a quarter of its auditors, after probationary staff were fired and buyouts were offered to a workforce already skewing older, according to the newspaper. The administration’s 2027 budget proposal envisions a total IRS head count of 69,000, which the Journal said would fall below the agency’s 2018 low. 

Should the agency’s 2027 funding track with the administration’s proposed budget, the IRS would have an enforcement division that is roughly one-third the size of its peak under the Biden administration. The staffing cuts are coinciding with a perception among some tax lawyers and former agency officials that deterrence is weakening, particularly for higher-income taxpayers and complex business entities, the news outlet said.

Audits of individuals earning at least $10 million fell by nine percent last year and are on pace to drop another 39 percent this year, while partnership audits have also declined after a previous push to scrutinize private equity firms and other complicated structures, according to the Journal.

Some lawyers have said they have spoken to taxpayers and tax-shelter promoters who seem “eager to cut corners or cheat” as a consequence of the staffing cuts, according to the report.

“There’s seemingly this mentality building which is, ‘The IRS isn’t going to catch me,’” Carolyn Schenck, a former IRS national fraud counsel who now works at Caplin and Drysdale in Washington, told the Journal.

The IRS collected less direct revenue from audits and appeals in fiscal 2025 than in any year since at least 2012, though the newspaper noted that audit-related revenue can take years to arrive. The IRS told the Journal that total enforcement revenue was up 12 percent through the first five months of fiscal 2026. 

The administration argues it is trying to make tax collection more efficient, including by using data analytics and artificial intelligence to improve audit selection and by expanding online taxpayer services, according to the report. IRS chief executive Frank Bisignano told lawmakers last month that better service and digital tools would help improve compliance, while senior agency officials have said technology can help the IRS work more efficiently with a smaller staff.  

Enforcement has already evolved under the staffing restraints.

The IRS opened more audits of large corporations last year than in 2024 and launched more criminal investigations overall, driven by identity theft and money-laundering cases, although probes into abusive tax shelters fell. Tax lawyers cited by the Journal said some ongoing audits remain highly detailed, and the government continues to pursue major tax disputes involving hedge fund managers and large multinationals including Meta Platforms and Coca-Cola. 

Read more at The Wall Street Journal