Dodging taxes may have turn into easier for the wealthiest Americans and large corporations. During the new administration’s first year in office, the U.S. Internal Revenue Service referred at most two cases of possible tax evasion by ultrawealthy people or large businesses to its criminal investigators – a significant decrease from previous years.
IRS Scrutiny Reduced
This decline marks a reversal of efforts made during the prior administration to increase IRS scrutiny of big companies and high-net-worth individuals. Danny Werfel, who served as IRS commissioner from 2023 to 2025, stated, “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.” He added that the reduction in criminal fraud referrals is a direct result of budget and staffing cuts.
Early last year, IRS agents assigned to billionaire audits reported to the International Consortium of Investigative Journalists (ICIJ) that their cases were halted due to decimated teams and frozen budgets, a consequence of cost-cutting measures led by billionaire Elon Musk. This data represents the first enforcement information released by the agency’s Large Business and International Division during the current administration.
Impact on Enforcement
Although criminal referrals do not always lead to prosecution, they are a key indicator of how actively the IRS is investigating tax evasion among the wealthy. According to the U.S. Treasury Department, the wealthiest Americans are responsible for a disproportionately large share of tax cheating. Experts believe sophisticated tax evasion schemes contribute to growing economic inequality. Without criminal referrals, the penalty for tax evasion is often a civil fine, which some experts say is not a strong deterrent.
Michael Welu, a former IRS agent, emphasized that overworked and understaffed teams are less likely to dedicate the necessary time to build a case for criminal referral. “Unless we start treating illegal schemes as what they are, there’s no incentive to stop,” Welu said.
The IRS declined to comment on this story. Last year, ICIJ reported that the IRS had begun closing audits of ultrawealthy individuals and corporations due to budget cuts. Agents described the Large Business and International division as being in a state of “near paralysis” due to lost staff and uncertainty about future layoffs.
The latest data shows that the Large Business and International Division made at most two criminal referrals in fiscal year 2025, which began in October of 2024. No cases of ultra-wealthy tax cheating were referred to criminal investigators between October 1, 2025, and January 31, 2026. The last time the number of criminal referrals from this division was this low was fiscal year 2019.
Prior to the recent cuts, the division had seen an increase in referrals, making seven referrals in both 2023 and 2024 after receiving additional funding. Robert Warren, a former IRS agent and assistant professor of accounting, noted, “It’s logical to expect a drop in referrals when you have so few agents.” He added, “If you’re engaging in a large tax evasion scheme and you’re a company under the authority of [the Large Business and International division], the chances of you going to jail are like that of getting hit by lightning.”
Frequently Asked Questions
What happened to the number of criminal referrals from the IRS’s Large Business and International Division?
The number of criminal referrals dropped to at most two cases during the new administration’s first year, a sharp decline from previous years. Between October 1, 2025, and January 31, 2026, no cases were referred.
What caused this decline in referrals?
The decline is attributed to cuts in the IRS budget and staffing, particularly within the Large Business and International Division and its Global High Wealth office.
What impact do these cuts have on tax enforcement?
Experts suggest that reduced staffing and resources make it less likely that complex tax evasion schemes will be investigated and prosecuted, potentially shifting the tax burden to other taxpayers.
As the IRS continues to navigate budget constraints and staffing challenges, what impact will this have on the agency’s ability to enforce tax laws and ensure equitable tax compliance?
Worth a look