Why IRS audits, already at their lowest levels, may fall further
In 1980, the agency's published audit rate was over 2 percent, and in 1960 it was over 3 percent.
In the 2010s, audit rates plunged for all income levels. For most Americans, an audit might have been a 1-in-100 event at the beginning of the decade. By the end of the decade, it was even less likely.
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For households with very high incomes, the audit rate is also considerably lower than it used to be. (The IRS also audits corporations and partnerships, and its data show steep declines in these audits, too.)
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The lower audit rates have led to less revenue for the government. The agency collected about $11 billion of additional revenue through personal income audits of 2010 returns. More recent tax years have a significant percentage of audits still being processed, but additional revenue is trending downward. For the 2019 tax year, the agency has collected only about $4.5 billion from personal income audits so far.
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The Trump administration is currently targeting a roughly 25 percent cut in the IRS workforce, according to people familiar with the matter, though they cautioned that the scale of potential cuts has continuously changed. The agency had about 100,000 employees in January, and cuts of between 18 percent and 50 percent have been discussed by the administration this year.
Bryan Camp, a professor at the Texas Tech School of Law who previously worked at the IRS, said a decrease in staffing would inevitably lead to fewer audits. He said the decline in audits over the last decade was primarily because of the loss of IRS workers; the agency cut its head count by about 20 percent from 2010 to 2020.
Congressional Republicans in the 2010s successfully cut appropriations for the IRS. President Biden's administration tried to reverse this trend as part of the Inflation Reduction Act of 2022. During Biden's term, the IRS added about 20,000 employees.
The goal was to increase IRS enforcement spending by about $45 billion over 10 years in hopes of increasing revenue by about $125 billion over the same period.
It's not clear if any increased revenues from the Biden plan will materialize. The Congressional Budget Office estimated at the time that it would take 30 months for the IRS to collect additional revenue from its new workers because of training time and the length of the average audit. By the time 30 months had elapsed, Trump was back in office. And congressional Republicans have since rescinded or frozen the extra IRS enforcement funding.
Trump has long feuded with officials over his own tax compliance. As a candidate in 2016, he said he had been under audit for years and believed it was 'very unfair.' The Trump Organization was found guilty of tax fraud in 2022, and a New York Times investigation in 2018 found Trump participated in tax schemes in the 1990s that included instances of fraud.
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