Critics are conflating different tax figures to allege pervasive underpayment.
Critics are conflating different tax figures to allege pervasive underpayment.
T he Treasury Inspector General for Tax Administration (TIGTA) recently reported a startling statistic: IRS examination revenue, or money from audits, fell by 35 percent in fiscal year 2025. According to TIGTA, examination revenue dropped from $10 billion in FY 2024 to $6.5 billion in 2025. TIGTA points to the substantial reduction in Internal Revenue Service (IRS) enforcement personnel as an important factor in the decline.
The implication seems obvious. Fewer IRS auditors apparently mean fewer audits. Fewer audits apparently mean less tax revenue. And predictably, the “tax-the-rich” leftists are claiming that fewer audits mean rich taxpayers and big corporations are now on a cheating spree. For example, Senator Elizabeth Warren (D., Mass.) claims that the IRS’s staff cuts are a “dream come true” for high-income taxpayers and corporations.
But it’s just not that simple. The numbers deserve a closer look.
Three entirely different numbers measure the results of an IRS audit. They are: 1) the amount of additional tax proposed by the auditor; 2) the amount eventually assessed after the taxpayer exercises available appeal rights; and 3) the amount the IRS actually collects. These numbers are not even close.
What Does 35 Percent Really Measure?
TIGTA reports that IRS examination revenue fell from $10 billion in 2024 to $6.5 billion in 2025. But by “examination revenue,” TIGTA means enforcement revenue ultimately collected and attributable to audits. It does not mean that IRS auditors found 35 percent less in taxes supposedly owed. That distinction is crucial.
According to the IRS’s 2025 Data Book, the agency closed 497,621 audits in 2025, which produced $26.8 billion in recommended additional tax. Let’s consider this: Auditors proposed $26.8 billion in additional taxes, yet TIGTA reports it collected only $6.5 billion in examination-related enforcement revenue that year.
These aren’t directly comparable figures. The $6.5 billion collected in 2025 did not necessarily come from the audits closed that year. In fact, it’s not likely that any of the $6.5 billion can be attributed to 2025 audits. Audits, appeals, and collections routinely stretch across several years. You cannot look at one year’s examination collections and assume that the number tells you how productive IRS auditors were that year.
In fact, proposed additional tax did not drop anywhere close to 35 percent in 2025. In fiscal 2024, the IRS closed 505,514 audits and recommended about $29.0 billion in additional tax. In fiscal 2025, they recommended $26.8 billion. That’s a revenue decline of about 7.6 percent — not 35 percent.
Proposed Tax Does Not Mean Tax Owed
Another problem is measuring IRS enforcement effectiveness by the amount that auditors propose. A revenue agent’s examination report is not a final determination of tax owed. And as I document in my book, How to Win Your Tax Audit, examination reports are wrong more often than not.
Taxpayers can disagree with an exam report and seek administrative review through the Independent Office of Appeals. If they don’t agree with the Appeals Office decision, they can petition the United States Tax Court without first paying the disputed tax. And taxpayers win plenty of those cases.
TIGTA addressed this issue in an earlier report. It used the IRS’s Enforcement Revenue Information System (ERIS), which tracks examination adjustments through subsequent stages of the enforcement process.
For examinations closed during fiscal years 2019 through 2022, the examination function initially recommended approximately $104.6 billion in additional tax. But examinations and Appeals Office assessments totaled only about $61.9 billion combined.
In other words, only about 59 cents of every dollar recommended by Exam survived the appeals process to become an assessment of tax. Just because an auditor says you owe money doesn’t mean you owe money.
Actual collections were lower still. TIGTA reported approximately $43.6 billion collected on those assessments as of September 2022. That amounts to roughly 42 cents collected for every dollar initially proposed by Exam. Moreover, as TIGTA points out, appeals and collection activity often remain unresolved for years. Therefore, the 42 percent figure is not a final lifetime collection rate.
The takeaway here is unmistakable. An auditor’s proposed adjustment is not the same thing as an assessed tax, and an assessed tax is not the same thing as money collected. These distinctions matter whenever somebody claims that adding or subtracting a certain number of IRS employees will automatically produce a corresponding amount of federal revenue. It is simply impossible to make that direct correlation.
The Rise of Correspondence Audits
Another interesting story is buried in the examination numbers nobody talks about. The IRS increasingly relies on correspondence audits, rather than face-to-face audits, the only numbers TIGTA addressed. Correspondence exams are conducted largely through the mail rather than by a revenue agent sitting across the table from a taxpayer. Such exams are more efficient and take less time. And considering that, in 2025, the IRS processed about 271 million individual, business, and miscellaneous tax returns, it’s no wonder the agency is resorting to more correspondence exams and fewer face-to-face exams.
Per IRS data, in FY 2021, correspondence examinations produced about $4.8 billion in recommended additional tax. Field examinations produced approximately $22 billion. By FY 2025, correspondence examinations produced approximately $7.7 billion. That means recommended additional tax from correspondence audits increased approximately 61 percent between 2021 and 2025. (Keep in mind, however, correspondence audits are also subject to appeal.)
Given that the sheer number of tax returns grows annually, it should come as no surprise that face-to-face audit coverage drops while the percentage of correspondence audits increases. No amount of IRS manpower will be sufficient to facilitate substantial increases in face-to-face audit coverage of 271 million (and rising) tax returns.
As the number of correspondence audits grows, the relationship between those and face-to-face audits has therefore changed dramatically. For example, in 2021, correspondence audits generated about 22 cents of proposed tax for every dollar proposed through field exams. By 2025, that number was approximately 40 cents.
According to IRS data, correspondence exams produced about $6.0 billion in recommended additional tax in 2024, growing to about $7.7 billion in 2025 — an increase of about 28 percent.
This occurred during the same period when the IRS’s workforce was shrinking. So much for a simple straight-line relationship between employee headcount and proposed tax revenue.
Be Careful with the 35-Percent Figure
None of this necessarily proves that cutting IRS employees has no downward pressure on enforcement. Obviously, at some point fewer employees means fewer one-on-one enforcement actions. But that’s not the same as proving that a certain reduction in IRS employees produces a corresponding reduction in revenue.
TIGTA’s own numbers demonstrate why. In fiscal 2025, IRS exam-related collections fell 35 percent. But recommended additional taxes from examinations fell only about 7.6 percent. Meanwhile, recommended additional tax from correspondence exams increased substantially. Those are three different measures moving in three different directions.
And here’s another number that the likes of Senator Warren aren’t discussing. Total federal revenue collected in 2025 was about $5.3 trillion. In 2024, the number was about $5.1 trillion. If Warren’s theory is correct, how did the federal government collect more money in 2025 with fewer IRS employees?
When you hear that IRS “audit revenue fell 35 percent,” understand what that number truly means. It does not mean IRS auditors uncovered 35 percent fewer unpaid tax obligations. It does not mean federal tax assessments resulting from audits fell by 35 percent. And it certainly does not establish that reduced IRS staffing caused the Treasury to lose a corresponding amount of tax revenue.
The real picture is considerably more complicated. And when it comes to IRS enforcement statistics, the difference between proposed, assessed, and collected isn’t mere legalese. It’s the difference between what the IRS says you owe and what you really do owe.