Fiscal year 2025 was a record-breaking 12 months for U.S. tax revenue, as taxpayers paid the IRS a total of $5.3 trillion, a 13.2% increase from FY 2023 and the most tax revenue ever paid, without adjusting for inflation, according to a recent report from the Treasury Inspector General for Tax Administration.
Tax revenue from business income taxes decreased by approximately $79 billion (14%) from FY 2024 to FY 2025. However, this decrease was offset by a larger increase of $232 billion (8.6%) in revenue from individual income taxes, TIGTA says. From FYs 2023 to 2025, individual income taxes paid increased by 17%.
But coming off a historic FY 2024 in which an all-time high $98.7 billion in enforcement revenue was collected, the IRS brought in $93.8 billion attributed to enforcement in FY 2025, a nearly 5% drop mainly attributable to a 35% decline year over year in examination-related revenue.
Enforcement includes examinations, collections, appeals, and the Automated Underreporter program, and makes up a small portion of the total tax revenue paid to the IRS.
Although the IRS hired a substantial number of employees in FYs 2023 and 2024, the Trump administration began efforts to reduce the size of the federal government last year. As a result, the IRS lost approximately 27% of its examination and collection staff from FYs 2024 to 2025—either through a deferred resignation program, workforce reductions, or retirements.
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“While the workforce reductions influenced metrics in FY 2025, the downstream effects of these reductions are likely to become more apparent over time,” TIGTA says in the report.
Revenue from collection functions increased by 17% from FYs 2023 to 2025, which offset declines across all other enforcement revenue categories. These increases were primarily due to increases in automated collection notices, which had been intermittently paused during the pandemic, TIGTA says. For example, the IRS sent approximately 3.2 million notices to individual nonfilers in FY 2025 after sending no notices in FY 2023.
Examination revenue increased by 41% percent from FYs 2023 to 2024, then decreased by 35% from FYs 2024 to 2025. The increase and subsequent decrease in examination revenue coincided with IRS investments in staffing using Inflation Reduction Act funding in FY 2024 and the workforce reductions last year.
The number of examinations of individual tax returns started dropped 30% from FYs 2024 to 2025, with examinations of individual taxpayers with incomes of more than $400,000 declining by 27%.
“We are concerned about how staffing losses are impacting the IRS’s ability to ensure that it meets Department priorities,” TIGTA says, although the watchdog made no recommendations to the IRS in this report.
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Tags: collections, Income Taxes, IRS, IRS enforcement, tax audits, tax enforcement, tax revenue, Taxes, TIGTA
