The audit division of the Internal Revenue Service (IRS) is experiencing significant reductions in its workforce, which could lead to potential losses of tens of billions of dollars in government revenue. These cuts follow the Biden administration’s efforts to enhance IRS staffing aimed at pursuing cases involving high-earning individuals and corporations.
The IRS is currently facing challenges that could undermine its effectiveness. Staff reductions initiated during Donald Trump’s government-wide cutbacks are causing major audits to be halted, and there is little expectation of bolstering the enforcement division in the near term.
According to The Wall Street Journal, these developments might result in substantial amounts owed to the government remaining uncollected. Furthermore, this situation undermines Biden-era initiatives to increase staff levels at the IRS, which were intended to facilitate easier access to IRS services and strengthen the auditing division.
To date, the IRS has seen a reduction of 7% of its workforce, and a hiring freeze is in effect. Additional staff cuts are anticipated in the near future. Concurrently, Congress has revoked nearly all the IRS enforcement funding that was approved in 2022.
These changes could be advantageous for corporations and high-wealth individuals, who often faced heightened scrutiny from the IRS. Former President Trump has previously discussed his conflicts with the IRS and attributed his refusal to release tax filings during previous elections to an ongoing audit.
Officials from Trump’s administration are minimizing the significance of the staff reductions and their impact on IRS audits. Treasury Secretary Scott Bessent has stated that a comprehensive review is underway, with priorities including collections, privacy, and customer service. The level of resources necessary to support these priorities is still under consideration.
The nomination of Bill Long by Trump to lead the IRS is pending Senate hearings. Meanwhile, reports from The Wall Street Journal indicate that audits involving two high-net-worth individuals have been terminated without any additional tax demands, and a prolonged audit of a corporation was promptly settled after the involved agent announced his impending departure from the government, prompting a request for the company’s best settlement offer.
This coverage originally appeared on Fortune.com.
