The IRS has exhausted the extra enforcement money it received under the Inflation Reduction Act, according to a new report from the Treasury Inspector General for Tax Administration, and the agency’s own enforcement numbers show what that funding gap has meant so far. Total IRS enforcement revenue fell from a historic high of $98.7 billion in fiscal year 2024 to $93.8 billion in fiscal year 2025, driven largely by a steep drop in examination activity. At the same time, the agency lost roughly a quarter of its examination and collection staff and leaned more heavily on automated notices instead of audits. For taxpayers, the shift changes what kind of IRS contact is most likely — fewer detailed audits, more form letters.
Enforcement Revenue Fell From $98.7 Billion to $93.8 Billion
TIGTA’s report, numbered 2026-3S0-045 and titled “Trends in Compliance Activities Through Fiscal Year 2025,” dated August 26, 2026, found that enforcement revenue decreased from $98.7 billion in fiscal year 2024 — a historic high — to $93.8 billion in fiscal year 2025. The report attributes the decline mainly to a 35 percent drop in examination-related revenue, the money the IRS collects specifically through audits rather than routine filing and collection activity. That decline came even as the IRS’s total tax collections kept rising: the agency brought in $5.3 trillion in total tax revenue for fiscal year 2025, up 13.2 percent from fiscal year 2023, according to the report. The $98.7 billion figure was, per the report, a record for IRS enforcement collections; the drop the following year interrupted that trend rather than continuing it, even as the agency’s overall tax collections — which include withholding, estimated payments and routine filing, not just enforcement actions — kept climbing to the $5.3 trillion total for fiscal year 2025.
3.2 million notices, and rising: TIGTA’s report shows the IRS leaning harder on automated notices as its enforcement staff shrinks, and reading exactly what one of those notices is asking for is the same first step whether it’s a nonfiler warning or a stalled refund. Read the notice decoder in The IRS Refund Recovery Kit.
Fewer Examiners, Fewer Audits: A 27 Percent Staffing Drop
The IRS lost approximately 27 percent of its Examination and Collection staff between fiscal years 2024 and 2025, according to the report. That staffing decline lines up with a 31 percent drop in the number of individual tax return examinations started over the same period. Audits of higher earners fell too: examinations of individual taxpayers with incomes over $400,000 declined by 27 percent, the same report found. TIGTA frames the trends as connected rather than coincidental — examination revenue depends on having examiners to conduct the audits, and a staffing cut of that size, compounding a 31 percent drop in exams actually opened, is consistent with an enforcement pipeline that simply has fewer people moving cases through it. The 27 percent decline in audits of taxpayers earning over $400,000 specifically means the staffing loss did not fall only on routine, lower-dollar exams; higher-income audits, which tend to take more examiner time per case, dropped by roughly the same share as the workforce itself.
3.2 Million Notices to Nonfilers Replace In-Person Exams
As examinations declined, the IRS sent approximately 3.2 million notices to individual nonfilers in fiscal year 2025, according to the report — up from none recorded in fiscal year 2023. Automated notices cost the IRS far less to generate than a full examination, and TIGTA’s numbers suggest the agency shifted toward that lower-cost enforcement tool as its examiner ranks thinned. The report treats the jump from zero nonfiler notices in fiscal year 2023 to 3.2 million two years later as one of the more visible signs of that shift, since generating and mailing a notice requires far less staff time than opening and working an examination file. The report does not say how many of the 3.2 million notices resulted in a filed return or collected revenue, only that the volume itself marks a sharp change. A notice-driven approach shifts the burden of resolving a tax issue onto the recipient, who has to read and respond to a letter, rather than onto an examiner who would otherwise walk a taxpayer through the same issue directly.
The Inflation Reduction Act Funding Ran Out December 31, 2025
The Inflation Reduction Act gave the IRS supplemental enforcement funding on top of its regular annual budget, intended to rebuild the kind of examination capacity that had eroded over the prior decade. TIGTA’s report states plainly that “as of December 31, 2025, the IRS has exhausted this supplemental enforcement funding.” Diana M. Tengesdal, Deputy Inspector General for Audit, signed the memorandum presenting the findings on behalf of TIGTA, the independent watchdog responsible for auditing IRS operations and reporting the results to Congress and the public. The report does not specify how much of the supplemental funding the IRS drew down before exhausting it, or how it was allocated between hiring, technology and enforcement operations in the years before it ran out — only that no more of that particular funding stream remains, at a moment when the agency’s core examination numbers were already falling through fiscal year 2025, the most recent year for which the agency’s own figures are in.
Reading an IRS Notice as Enforcement Shifts to Automation
TIGTA’s numbers show the IRS sending 3.2 million notices to nonfilers in a single year while its examination staff shrank by more than a quarter, and a notice generated by an automated system does not always explain itself the way an examiner on the phone might. Knowing what a specific notice is actually asking for, and by when, is the practical problem that shift creates for anyone who receives one.
The IRS Refund Recovery Kit includes a refund status tracker spreadsheet and the refund-trace steps under Form 3911 for keeping a paper trail as each notice arrives.
Look up the refund status tracker in The IRS Refund Recovery Kit.
This article was produced with AI assistance and checked against the primary source linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
