IRS Could Lose $20B and Face $140B National Deficit in Enforcement Funds Under Trump Administration's Cuts

Losing billions of fundings would impact tax audits, especially for wealthy entities, and increase the national deficit.

By Thea Felicity

Nov 27 2024, 10:20 AM EST

IRS Commissioner John Koskinen Visits Miami IRS Office — MIAMI, FL - JULY 31: Internal Revenue Service Commissioner John Koskinen speaks to the media during a visit to the Miami office at the Claude Pepper Federal Building on July 31, 2014 in Miami, Florida. Mr. Koskinen is touring several IRS offices since he became head of the nation's tax agency. Joe Raedle/Getty Images

The Internal Revenue Service (IRS) stands at a risk of losing $20 billion in funding if left to Congressional action.

At the moment, the enforcement activities of this agency rely on funding frozen by overly complex legislative language. Treasury officials stated that lawmakers need to work fast because funds will be pivotal for the operations and IRS audits, including a focus on wealthy individuals and giant corporations.

The loss would mean the nation's deficit would grow by $140 billion, says Treasury Deputy Secretary Wally Adeyemo, per AP News. Also, the IRS would be forced to drastically reduce operations, meaning fewer audits on high-income earners and major corporations. That reduction would undermine the agency's capacity to raise taxes and could even make it implement a hiring freeze and delay its modernization effort.

What's worse is the fact that the government is suffering from financial issues already because of a national debt of $36 trillion, forcing cuts in spending. The reduction of $20 billion in IRS funding would only hamper the agency in collecting taxes effectively, complicating the process of eliminating the national deficit and worsening the financial condition of the country as well.

Trump and the Funding Crisis

ABC News shared that the Trump administration's budget cuts are risking the funding for the IRS as well. The White House's deal with the Republicans focuses on diverting funds away from the IRS and instead toward other programs. The budget for the IRS is nowhere in the proposals announced by the president for his tax reform.

The 2025 fiscal year is just around the corner and the IRS is in heavy waters with billions of losses on their soldier, preventing it from carrying out key tasks in the next administration, including audits and tax enforcement. Now more than ever, the agency will need firm and consistent support, especially when the country's tax collection will be highly valuable to the management of the national debt and deficit.