Key Points
As of December 18, 2025, the size of the Internal Revenue Service (IRS) has been reduced by approximately 27% compared to the beginning of 2025. The total number of employees dropped from over 102,000 in January 2025 to around 74,000 by December. IRS Chief Executive Frank Bisionano stated that despite staff cuts, the agency will continue to prioritize "data-driven enforcement." Experts note that certain issues, such as unreported income, unusually high deductions, and refundable credits, remain high-risk triggers for audits.
This tax season, following staff reductions influenced by the Department of Government Efficiency (DOGE), led by Elon Musk, and other 2025 cutbacks, the IRS has experienced significant downsizing. As millions of taxpayers rush to meet the April 15 filing deadline, many are questioning whether the reduced staffing will lower their chances of being selected for an audit.
Data from the Taxpayer Advocate Service shows the IRS workforce shrunk by about 27% from the start of 5 to December 18, 2025. However, experts suggest this may not necessarily decrease an individual's audit risk. Eric Hilton, National Director at tax consulting firm Alliantgroup, explained that the IRS employs "a multitude of enforcement tools," including automated math error notices, document matching systems, correspondence audits, and field audits.
Hilton, a former director in the IRS's Small Business/Self-Employed Division, indicated that even with fewer staff, certain tax issues remain "easy targets" for audit scrutiny.
1. High-Risk Audit Triggers Persist Despite Budget Cuts
If a tax return omits income already reported to the IRS (such as income documented on information returns like Forms 1099 or W-2), the agency's automated underreporter system will flag the discrepancy. The IRS will then issue a CP2000 notice proposing adjustments to income, tax payments, credits, or deductions on the return. In contrast, a correspondence audit, also conducted via mail, involves a broader but still limited review of the return.
According to the latest IRS data, nearly 80% of tax examinations in fiscal year 2024 were conducted by correspondence, with the remainder being field audits. The audit rate for individual income tax returns for tax years 2014 through 2022 was 0.40%. It is noted that the final rate for 2022 may change as some returns remain within the three-year statute of limitations.
2. Changes in IRS Enforcement Funding
In 2022, Democrats approved nearly $80 billion in funding for the IRS through 2031, with $45.6 billion designated for enforcement. The IRS had stated it would use these funds to reverse "historic lows" in audit rates for large corporations, complex partnerships, and high-income individuals. Data shows the audit rate for taxpayers earning over $1 million was 0.7% in 2019, significantly lower than the 7.2% rate in 2011.
However, a March 2026 report from the Treasury Inspector General for Tax Administration, an independent agency within the Treasury Department, stated that after Republican-led cuts, the enforcement funding approved in 2022 had been reduced to $3.8 billion. President Trump's fiscal year 2027 budget blueprint, released on April 3, proposes further cuts to IRS funding. If approved by Congress, the IRS enforcement budget would be reduced by 18% compared to the 2026 fiscal year.
3. IRS Continues to Advance "Data-Driven Enforcement"
Despite budget reductions, "data-driven enforcement" remains one of the three strategic priorities listed by the IRS in its FY27 congressional budget request. IRS Chief Executive Frank Bisionano wrote in an April 3 report, "The IRS is modernizing enforcement by expanding the use of artificial intelligence, advanced analytics, and data integration." He added that these tools allow for more precise identification of high-risk noncompliance and fraud, help prevent identity theft, and enable the concentration of enforcement resources on high-value cases.
Experts point out that the following situations are more likely to draw heightened IRS scrutiny:
1. Abnormal Ratios of Income to Deductions While the IRS does not publicly disclose its audit selection criteria, experts indicate the agency uses software to flag returns where deductions are significantly disproportionate to reported income. Hilton noted this includes itemized deductions like charitable contributions or unusually high business expenses reported on Schedule C. For example, a person with only $60,000 in W-2 wages reporting a $30,000 to $40,000 loss on Schedule C would be an easily identifiable anomaly for AI or data analysis. The IRS might inquire via correspondence, making it crucial to maintain detailed records to support return entries.
2. Refundable Tax Credits Victoria Boone, a tax advisor with over 20 years of prior experience at the IRS, stated that another area of focus for the IRS is refundable credits—credits that can generate a refund even if no tax is owed. "Any refundable credit is going to be scrutinized more heavily by the IRS," she said. An example is the Earned Income Tax Credit (EITC), a benefit for low- to moderate-income workers. For the 2025 tax year, the maximum EITC for a filer with three or more qualifying children is $8,046. This credit has strict eligibility requirements involving income, relationship, and residency tests, and is often claimed erroneously. Most EITC audits are conducted via correspondence, with the IRS requesting additional documentation to prove eligibility. In FY2022, the IRS examined 0.7% of returns claiming the EITC.
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