The Internal Revenue Service (IRS) is reportedly bracing for a substantial drop in revenue this spring amid payment evasion by individuals and businesses as well as huge staffing cuts.
What Happened: Tax officials are forecasting a more than 10% dip in tax receipts by the April 15 deadline as compared to 2024. This slump equates to a loss exceeding $500 billion in federal revenue, reported The Washington Post. The IRS amassed $5.1 trillion in the previous year.
This anticipated drop is tied to shifts in taxpayer behavior and President Donald Trump‘s rapid dismantling of certain IRS components. The administration has begun the process of dismissing approximately 20,000 agency staff, with a primary focus on recent hires in the taxpayer services and enforcement divisions.
High-value corporations and taxpayers are no longer under IRS investigation due to the agency’s need to allocate resources for internal systems maintenance. This year has seen a 1.7% decrease in returns compared to the same period in the filing season in 2024.
A decrease in federal revenue would align with a cash shortage caused by the debt limit. With Congress yet to raise the $36 trillion cap, borrowing is restricted, forcing the Treasury to use "extraordinary measures" since January to avoid default.
The Bipartisan Policy Center think tank projected that the government will exhaust its ability to manage cash flow and pay its bills on time between mid-July and early October unless Congress raises the debt ceiling.
SEE ALSO: Bitcoin Reserve? No, ‘House Of Doge’ Just Launched A Dogecoin Reserve Valued $1.83 Million
Why It Matters: Notably, tax officials had cautioned the incoming Treasury Department team of the Trump administration that aggressive staff cuts would lead to backlogs. They also recommended that the Trump administration gradually reduce IRS staff numbers while ensuring tax administration remains unaffected.
The IRS’s predicament comes amid growing criticism of the agency. Real estate mogul and social media personality Grant Cardone recently expressed his disdain for the IRS, suggesting that Americans shouldn’t have to pay income taxes.
Also, President Trump’s Tax Plan including the extension of the 2017 Tax Cuts and State and Local Tax deduction relief has met with criticism. Some experts even estimate that this plan could reduce federal revenue by $5 trillion.
The potential revenue shortfall could have significant implications for the national debt and overall economic stability.
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
