The Internal Revenue Service saw a significant decline in revenue collected from audits in fiscal year 2025, according to a report released Monday by the Treasury Inspector General for Tax Administration (TIGTA). Audit revenue fell to $6.5 billion, a 35 percent drop from the $10 billion generated the previous year. This decrease followed substantial staffing reductions implemented during the Trump administration, which led to the loss of approximately 30 percent of IRS audit personnel.

The report attributes the reduced audit income largely to the agency’s diminished capacity to conduct the detailed investigations required to identify and collect unpaid taxes. TIGTA’s findings reveal that the IRS initiated 30 percent fewer individual audits in FY 2025 compared to FY 2024. In one division, officials temporarily halted new audits for six months amid uncertainty over whether adequate staff would be available to carry them out. Given that IRS audits often span several years, the full financial impact of this workforce shrinkage may continue to emerge in coming years.

These staffing cuts countered efforts by the Biden administration to strengthen IRS enforcement aimed at high earners and large corporations. The prior administration sought to boost the agency’s budget by approximately $80 billion and increase employee headcount by tens of thousands. However, these initiatives were reversed under Republican leadership and the Trump administration, which rolled back much of the additional funding and reduced the workforce.

Officials from the Trump administration have argued that advances in technology, including artificial intelligence, could enhance the IRS’s audit selection and investigative efficiency, potentially offsetting the need for as many employees. Still, detailed plans for implementing such tools have not been publicly disclosed. Frank Bisignano, the IRS’s inaugural chief executive officer, has downplayed concerns regarding workforce reductions.

While audit-related revenue declined sharply, other IRS enforcement activities showed relative stability. The agency collected similar amounts through mailed notices and phone outreach concerning owed taxes. Additionally, several collection programs paused during the COVID-19 pandemic were restarted in 2024.

Overall, total tax revenue reached a record $5.3 trillion in FY 2025, driven primarily by withholding from workers’ paychecks, which tends to reflect broader economic growth and inflation. Despite this, the IRS estimates that roughly $700 billion annually goes unpaid under current tax laws.