Dodging taxes has become less risky for the wealthiest Americans and large corporations following a significant shift in IRS enforcement priorities. Fresh data obtained by the International Consortium of Investigative Journalists (ICIJ) reveals that the Internal Revenue Service referred at most two cases of potential tax evasion by high-net-worth individuals or businesses for criminal investigation during the first year of the current administration. This marks a sharp decline from previous years and signals a reversal of efforts to increase scrutiny of the ultra-rich, a key focus during the prior administration.
The decrease in criminal referrals underscores a broader pullback in IRS enforcement against those with substantial financial resources. The change comes after a period of increased funding and staffing aimed at bolstering the agency’s ability to audit complex tax schemes employed by the wealthiest Americans. Experts warn that reduced enforcement could shift the tax burden onto middle- and lower-income earners, as those who avoid paying their fair share are less likely to be held accountable. As Danny Werfel, former IRS commissioner from 2023 to 2025, stated after reviewing the data, “When the IRS budget and staff is cut, your taxes don’t go down. Instead, those that choose not to play by the rules shift the burden of funding our government to those that do.”
The decline in investigations began to materialize quickly after the change in administration. Early last year, IRS agents assigned to audits of billionaires told ICIJ that their cases stalled as teams were reduced and budgets were frozen, a cost-cutting initiative reportedly led by billionaire Elon Musk. These new referral numbers represent some of the first enforcement data released by the agency’s Large Business and International Division (LBID) during the current administration, the division responsible for auditing large businesses and billionaires.
Staffing Cuts Hamper Enforcement Efforts
The drop in criminal referrals coincides with substantial staffing reductions within the IRS, particularly in the division responsible for auditing the wealthiest taxpayers. Last year, ICIJ reported that the IRS had begun closing audits of ultrawealthy individuals and corporations due to budget cuts. The Global High Wealth office, a unit within LBID specifically tasked with auditing billionaires, experienced a particularly severe impact, losing 38 percent of its staff in the weeks following the change in administration.
This reduction in personnel stands in stark contrast to the previous administration, which had prioritized hiring experts to unravel complex tax maneuvers. The recent cuts disproportionately affected newer hires, who lacked the job protections of more tenured employees. Robert Warren, a former IRS agent and assistant professor of accounting at Radford University in Virginia, explained that a smaller workforce inevitably leads to fewer investigations. “It’s logical to expect a drop in referrals when you have so few agents,” he said, adding that the chances of facing criminal charges for large-scale tax evasion are now “like that of getting hit by lightning.”
The Importance of Criminal Referrals
While not every criminal referral results in an investigation or prosecution, they serve as a crucial indicator of how aggressively the IRS is pursuing sophisticated tax avoidance schemes among high-net-worth individuals. The U.S. Treasury Department has noted that the wealthiest Americans are responsible for a disproportionately large share of tax cheating. Experts believe that these schemes contribute significantly to growing economic inequality, as highlighted by organizations like Oxfam in a recent report.
Without the threat of criminal prosecution, the consequences for tax evasion often amount to civil fines, which many wealthy individuals can absorb without significant financial hardship. Michael Welu, a former IRS agent specializing in identifying potential criminal cases, emphasized the need for stronger enforcement. “Unless we start treating illegal schemes as what they are, there’s no incentive to stop,” he said.
The latest data reveals that the LBID made at most two criminal referrals in fiscal year 2025, which began in October 2024, and made no referrals between October 1, 2025, and January 31, 2026. This represents the lowest number of referrals from the division since fiscal year 2019. Prior to the recent cuts, the division had seen a slight increase in referrals, making seven referrals in both 2023 and 2024 after receiving a funding boost.
Looking Ahead
The IRS declined to comment on the decline in criminal referrals. The agency’s future enforcement priorities remain uncertain as the administration continues to implement its budget and staffing plans. The impact of these changes on tax revenue and economic inequality will likely become clearer in the coming months and years. The next key date for updates on IRS enforcement activity will be the release of data for the full fiscal year 2026, expected in late 2026.
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