IRS Scrutiny of Ultrawealthy Declines Under Trump Administration
Tax enforcement for the wealthiest Americans and large corporations has significantly decreased under the current administration, with the Internal Revenue Service (IRS) referring a historically low number of cases for criminal investigation. This marks a sharp reversal from efforts made during the previous administration to increase scrutiny of high-net-worth individuals and businesses.
Dramatic Drop in Criminal Referrals
During the first year of the fresh administration, the IRS referred at most two cases of potential tax evasion by ultrawealthy individuals or large businesses to its criminal investigators. This represents a substantial decline compared to previous years, according to data obtained by the International Consortium of Investigative Journalists (ICIJ). The last time the number of criminal referrals from the Large Business and International Division was this low was fiscal year 2019.
Impact of Budget Cuts and Staffing Reductions
The decline in criminal referrals coincides with significant budget cuts and staffing reductions within the IRS, particularly impacting the division responsible for auditing billionaires and large corporations. The Global High Wealth office, within the Large Business and International Division, experienced a 38% workforce reduction in the weeks following the administration taking office.
Prior to these cuts, the office employed 353 people, but now operates with just 220 employees. This reduction is greater than the overall loss rate at the IRS, hindering the unit’s ability to effectively audit the wealthiest Americans.
IRS agents assigned to billionaire audits reported that their cases stalled when teams were reduced and budgets were frozen, following cost-cutting measures.
Expert Concerns
Danny Werfel, former IRS commissioner (2023-2025), emphasized that cuts to the IRS budget do not translate to lower taxes for citizens, but rather shift the tax burden to those who comply with the law. He stated that the reduction in criminal fraud referrals is a direct consequence of these cuts.
Robert Warren, a former IRS agent and assistant professor of accounting at Radford University, noted that with fewer agents, the likelihood of a large tax evasion scheme resulting in prosecution is minimal.
Michael Welu, a former IRS agent specializing in identifying major cases for prosecution, explained that overworked and understaffed audit teams are less likely to dedicate the time required to pursue criminal referrals for significant tax cheating.
Previous Funding and Efforts
Prior to the recent cuts, the IRS had increased efforts to audit wealthy individuals following the passage of the 2022 Inflation Reduction Act, which allocated $80 billion in additional funding for tax enforcement. However, subsequent legislative action reduced this budget by half.
ICIJ and the IRS
The International Consortium of Investigative Journalists (ICIJ) is an independent global network of over 280 investigative journalists and 140 media organizations in more than 100 countries. Founded in 1997, the ICIJ focuses on exposing international crime and corruption.
The IRS declined to comment on this story.