IRS cuts may lead to $500 billion revenue loss

Officials are warning of a potential $500 billion drop in tax revenue this year. This decline is expected due to staffing cuts at the Internal Revenue Service (IRS) and changes in taxpayer behavior. The anticipated loss would make up about 10% of the revenue collected last year. In 2024, the IRS took in around $5.1 trillion. The drop is linked to President Donald Trump's policies, which have led to the firing of thousands of IRS employees. Around 11,000 positions have been cut already, with ongoing lawsuits possibly affecting more employees. Many of the job cuts were in the taxpayer services and enforcement divisions. As a result, IRS employees say the agency has stopped investigating high-value corporations and individual taxpayers. This reduction in enforcement has led some taxpayers to feel they can take risks with their filings. Officials report an increase in taxpayers who are not filing their returns. Some are also claiming credits or deductions they do not qualify for. Tax authorities believe these people are counting on fewer audits due to the lack of resources at the IRS. A spokesperson for the Treasury Department dismissed the concerns, calling them “sensational and baseless,” but did not provide further details. The deadline for filing 2024 tax returns is April 15.