IRS staff reductions in the 2025 fiscal year coincided with a decrease in the tax revenue the agency brought in via enforcement actions, according to a new report from the Treasury Department's inspector general for tax administration. The report warns that recent workforce cuts could undermine the agency's ability to execute its mission.

In fiscal 2025, which ended Sept. 30, 2025, the IRS brought in $93.8 billion in enforcement revenue, down 5% from a "historic high" of $98.7 billion in 2024, the report says. That decrease was "mainly attributable" to a 35% decline in audit-related revenue, according to the report.

Further revenue declines are likely. The Trump administration's workforce cuts in fiscal 2025 contributed to the revenue decline during that period, and "the downstream effects of these reductions are likely to become more apparent over time," the report says.

The IRS lost about 28% of its examination and collection staff from fiscal 2024 to fiscal 2025, and further cuts came in fiscal 2026, according to the report.

"These losses present a challenge to improving taxpayer service and enforcing the nation's tax laws," the report states. "We are concerned about how staffing losses are impacting the IRS's ability to ensure that it meets department priorities and we have separate reviews that will evaluate their plans."

The recent cuts marked a reversal from fiscal 2023 and 2024, when the IRS hired a significant number of employees. An IRS spokeswoman declined to comment on the report, but pointed to April congressional testimony by IRS CEO Frank Bisignano, who noted that the agency is investing in artificial intelligence and other technology to improve the effectiveness of examiners, collectors, and other personnel. The result, he says, is that the IRS is able "to catch instances of tax evasion that would have been undetectable just a few years ago."

"Thanks to this data-driven approach, our skilled enforcement and revenue personnel can focus their efforts on higher-value work," Bisignano said in written testimony, noting that more data and more modeling continue to improve the IRS' ability to discover tax evaders. "That improvement, in turn, will help us reduce the resources spent on false positives in audits, and improve service to taxpayers who are doing their best to comply."

Though the report focuses on compliance activities at the IRS, it points to a larger divide over the role of the agency between the current and previous presidential administrations. The Inflation Reduction Act of 2022 allocated nearly $80 billion in additional funding to the IRS to be disbursed over a 10-year period. More than half of that money was earmarked for enforcement activities as backers of the measure envisioned a better-resourced agency going after higher-wealth tax evaders with complex financial situations that are more challenging for IRS auditors to unravel.

Subsequent congressional actions have whittled down that pool of money, and the inspector general's report notes that all of the supplemental funding for enforcement from the Inflation Reduction Act has expired. The IRS had about 130,000 employees in January 2025, according to a June inspector general's report. Over the course of the year, as Elon Musk's DOGE efforts to shrink the federal workforce unfolded, more than 31,000 employees, or 28% of the total workforce, left the agency, according to the report. The IRS began hiring back some of those positions, restoring about 2,000 roles as of January 2026, according to the inspector general.

Overall tax revenue collected by the IRS has been increasing. In fiscal 2025, Americans paid $5.3 trillion in taxes, 4.2% higher than 2024 and 13.2% higher than 2023.

Within the IRS' enforcement operations, the lion's share of revenue it brings in comes from collection efforts targeting delinquent taxpayers and accounts with a balance due. From 2023 to 2024, collection revenue increased nearly 18% to $82.1 billion before falling slightly in 2025, changes that coincided with the agency's staffing levels over the same period, the new report notes.

In 2024, the IRS' examination and collection staff numbered 27,217. By January 2026, that workforce had fallen nearly 36% to 17,517, according to the new inspector general's report.

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