On February 20, 2025, a traffic light outside the U.S. Internal Revenue Service (IRS) building in Washington, D.C. changed to red.
The IRS has seen a significant loss of tax auditors, with a report from a watchdog revealing a decline in government efficiency linked to Elon Musk. By March 2025, the number of employees had dropped by over 11,000, which represents an 11% reduction due to factors like probationary periods and a postponed resignation initiative, according to a May 2 report from the Treasury Inspector for Tax Administration.
In particular, certain divisions experienced a much more pronounced impact. For example, the IRS lost 31% of its revenue agents, totaling 3,623 individuals, as noted in the report.
In personal finance news, several aspects such as future interest rate decisions from the Federal Reserve could have implications for individuals. Some prices have decreased, yet experts caution that this trend may not last. Additionally, a digital version of your Social Security Card is set to be launched soon.
The Inspector General’s report coincided with President Donald Trump’s discretionary budget requests for the 2026 fiscal year, which proposed nearly $2.5 billion to address concerns over the perceived “weaponization” of IRS enforcement.
On Tuesday, U.S. Treasury Secretary Scott Bescent defended reduced spending during House hearings, stating that the federal government had cut $2 billion from the agency’s IT budget without causing operational disruptions. As of April 25, the IRS had processed more than 140 million returns, slightly up from the previous year.
The Treasury did not respond to inquiries regarding CNBC’s coverage of the TIGTA report.
IRS Workforce Reductions Impact Compliance Efforts
In a March letter addressed to former acting IRS Commissioner Melanie Krauss, over 130 House Democrats expressed concern that reducing compliance staff could hinder the agency’s efficiency in collecting taxes from wealthy individuals who evade payments. This response came after staff reductions that began in late February.
Lawmakers argued that these cuts would diminish the IRS’s ability to improve collections and address complex tax avoidance strategies employed by high-income earners and large corporations.
Audits targeting the wealthiest 0.1% of taxpayers reportedly yielded over $6 in revenue for every dollar spent on resources, according to a 2023 study from researchers at the U.S. Treasury, MIT, Wharton School, and the University of Sydney.
During a recent House hearing, Bescent mentioned that “collections” would remain a priority for the IRS. However, he indicated a shift toward achieving revenue goals not through traditional collection methods, but rather through innovative approaches utilizing AI technology.
“The expectation is that collections will remain strong,” he noted.
