Your taxes are funding a shrunken IRS that's gone soft on cheaters — and that may have cost taxpayers $3.5 billion last year, watchdog warns

At the start of President Donald Trump’s second term in 2024, his administration aimed to reduce government spending, including by reducing its total number of employees, through DOGE — Elon Musk’s Department of Government Efficiency. This resulted in a 30% drop in the number of auditors at the IRS’ disposal.

The effects of that decision now have a data point attached to it, and “the downstream effects of these reductions are likely to become more apparent over time,” the report said.

That’s because the reduction in staff impacts the IRS’ ability to conduct time sensitive investigations to collect unpaid taxes from individuals and corporations that try to under-report what they earned.

Interestingly, the IRS began roughly a third less audits of individuals in fiscal 2025, TIGTA said. One division of the agency did not start new audits for six months because of uncertainty about whether they’d have enough staff to pursue them.

A reversal of the Biden administration’s help to the IRS

The decline in audits and staffing is a reversal from efforts under the Biden administration, which approved roughly $80 billion in additional IRS funding via the Inflation Reduction Act of 2022 to hire tens of thousands of new employees and go after bad actors. In 2024, the IRS estimated that the funding would help it recoup hundreds of billions of dollars in additional revenue by pursuing overdue and unpaid taxes.

Since then, the number of IRS employees working in auditing and collections dropped to 17,517, as of January 2026, a decline of almost 10,000 workers from fiscal 2024.

For their part, Trump administration officials have said that leveraging artificial intelligence will help identify tax evaders without needing to rely on as many paid workers.

“Our advanced data and analytic strategies allow us to catch instances of tax evasion that would have been undetectable just a few years ago,” IRS CEO Frank Bisignano said In a written April congressional testimony. “Along those lines, the IRS is using artificial intelligence and advanced analytics to identify high-risk areas of non-compliance and fraud with greater accuracy.”

Republican lawmakers in favor of cutting IRS resources have also argued that the agency would use extra funding to target middle-class Americans families.

But TIGTA says that reducing staff isn’t benefiting the agency in enforcing the nation’s tax laws. “We are concerned about how staffing losses are impacting the IRS’s ability to ensure that it meets department priorities,” it wrote in the report.

Natasha Sarin, a former counselor on tax policy to former Treasury Secretary Janet Yellen, agrees. She told NPR that stripping the IRS of resources is not a money-saving proposition.

“It’s a money-losing one, because you do a less good job of collecting taxes,” Sarin said.

“Gutting the IRS is a win for wealthy tax cheats”

Because audits take a long time to complete, some of the declines in audit revenue could be reversed when investigations are finished, TIGTA said.