- Treasury and IRS officials project a more than 10% drop in tax receipts by April 15, 2025, equating to over $500 billion in lost revenue compared to the $5.1 trillion collected in 2024, a decline attributed by The Washington Post to taxpayer noncompliance and the Trump administration’s cuts, including firing over 11,000 IRS workers.
- The IRS faces operational strain after dismissing nearly 20,000 employees, dropping high-value investigations, and seeing leadership exits like compliance head Heather Maloy, with warnings to Trump’s team about risks to receipts ignored, per a January presentation cited by The Post.
- Despite a 2.8 percent economic growth in 2024, weekly reports show a 1.7 percent decrease in returns, while deeper nonpublic data predicts the $500 billion shortfall, potentially driving up the $36.2 trillion national debt as the IRS, collecting 95 percent of federal revenue, struggles with reduced capacity.
The Internal Revenue Service (IRS) is addressing a serious challenge as Treasury Department and IRS officials project a significant decline of more than 10 percent in tax receipts by the April 15, 2025, deadline compared to 2024, amounting to over $500 billion in lost federal revenue, according to a report by The Washington Post. This forecast, based on nonpublic data shared by anonymous sources with the publication, comes as the IRS collected $5.1 trillion last year, making the anticipated shortfall equivalent to over half the $825 billion spent on the Defense Department in fiscal 2024. Natasha Sarin, president of the Yale Budget Lab and a former senior Biden administration tax official, emphasized the magnitude of this shift, noting, “The idea of doing that in one year, it’s hard to grapple with how meaningful of a shift that represents.” The stakes are high, as the IRS accounts for 95 percent of federal revenue, and a shortfall of this scale could balloon the national debt – already at $36.2 trillion – should Congress fail to adjust spending accordingly.
Driving this projected revenue drop is a confluence of factors tied to the Trump administration’s aggressive restructuring of the IRS, including the dismissal of over 11,000 workers and plans to fire nearly 20,000 agency employees, particularly targeting new hires in taxpayer services and enforcement. Senior tax officials attribute the decline directly to changing taxpayer behavior, with an uptick in online chatter indicating individuals intend to evade taxes or claim ineligible credits, betting on weakened audit capacity. The IRS has already dropped investigations into high-value corporations and taxpayers, redirecting resources to maintain basic operations, a move several agency employees confirmed. This triage follows significant leadership turnover, with two commissioners resigning since Trump took office and Heather Maloy, head of compliance, stepping down effective Friday.
The Washington Post obtained records showing senior IRS officials warned the incoming Trump administration of these risks in a January presentation, a 68-slide deck advocating for gradual staff reductions through digitization and automation rather than abrupt cuts. “Aggressive reductions to budget and personnel capacity risk backlogs, delays, reduced receipts, and diminished capacity to build next generation digital capabilities,” the presentation cautioned, as per the report, highlighting a vision to modernize while reducing the IRS footprint. Yet, with congressional Republicans slashing more than $20 billion in agency resources and IRS officials clashing with Elon Musk’s U.S. DOGE Service over data access, the IRS struggles to adapt. Weekly filing reports reveal a 1.7 percent drop in returns received compared to 2024, a figure dwarfed by deeper, nonpublic projections factoring in scheduled payments, extensions, and noncompliance trends—offering a granular view of the $500 billion gap.
Despite a Treasury spokesperson dismissing The Post’s report as “sensational and baseless,” experts like Dorothy A. Brown of Georgetown University Law Center argue the decline defies expectations given the U.S. economy’s 2.8 percent growth in 2024. Natural disasters, such as the Los Angeles-area wildfires, and economic turbulence might prompt some to delay filing until October, per Timur Taluy of FileYourTaxes.com, but these alone cannot explain the shortfall. IRS helpline performance has slipped, with 85 percent of callers reaching representatives versus nearly 94% last year, hinting at operational strain. As corporations face their April 15 first-quarter estimated tax deadline, Sarin warns, “The thing that I think is really alarming is if this data ends up telling a story about how this filing season is evolving, and you’re seeing it happen in real time.” The IRS’s predicament underscores a broader challenge: balancing modernization with immediate fiscal demands in an era of rapid policy upheaval.
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