^{Republican lawmakers have accused Daniel Werfel, the Internal Revenue Service commissioner, of making the agency more intrusive and even being lawless.Credit...Shuran Huang for The New York Times}

The Internal Revenue Service (IRS) is undergoing substantial workforce reductions, leading to concerns about its capacity to effectively audit high-income individuals and corporations. These changes come amid broader governmental efforts to streamline federal agencies and reduce spending.​

Key Developments

Staff Reductions

• Over 22,000 IRS employees have accepted voluntary buyouts as part of a cost-cutting initiative. ​
• An additional 7,000 probationary employees were terminated earlier this year, with plans to reduce the agency's workforce by up to 40%. ​

Impact on Audits

• The reduction in staff is expected to lead to fewer audits, particularly targeting wealthy individuals and large corporations. ​
• Experts warn that decreased enforcement could embolden tax evasion and reduce federal revenue. ​

Technological Shifts

In response to staffing challenges, the IRS is increasingly relying on artificial intelligence (AI) to identify potential tax compliance issues. ​

• While AI can efficiently flag anomalies, experts caution that complex tax cases still require human judgment for accurate assessment.​

Financial Implications

The Congressional Budget Office estimates that proposed cuts to IRS enforcement could increase the federal deficit by $24 billion over the next decade. ​

Other analyses suggest that the cumulative effect of reduced IRS funding could lead to revenue losses exceeding $500 billion annually. ​

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The significant downsizing of the IRS raises concerns about the agency's ability to enforce tax laws effectively, particularly among high-income earners. As the IRS navigates these challenges, the balance between technological innovation and adequate staffing remains critical to maintaining tax compliance and revenue collection.​

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