With a dire warning that “[t]ax shelter promoters are watching,” a group of U.S. Senators is questioning a significant decline in Internal Revenue Service investigations of abusive tax schemes as reported in IRS Criminal Investigation’s annual report. In a January 28 letter to Acting IRS Commissioner Scott Bessent and IRS Criminal Investigation Chief Guy Ficco, seven Senators (six Democrats and one Independent), note that CI’s 2025 annual report states that investigations of abusive tax schemes declined 63 percent and request an explanation as to “how staffing cuts and other factors contributed to this decline, what impact it will have on revenues and deterring tax cheats, and how the IRS will adequately enforce the law in the face of substantial staffing and budget cuts.”
In their letter, the Senators note that IRS enforcement funding and workforce “have been systemically slashed,” referring to significant recissions of billions appropriated for IRS operations and enforcement by the Inflation Reduction Act of 2022, and the plan to cut the IRS’s FY2026 budget by more than 9 percent and enforcement funding by 8 percent.
The IRS workforce has also been significantly reduced since January 2025, with the Senators noting that between January and May 2025, the IRS lost 25 percent of its overall personnel, and IRS-CI lost 10 percent of its staff. In addition, IRS-CI anticipates losing another 20 percent of special agents over the next two years due to retirements, and a significant portion of IRS-CI special agents have been diverted from traditional tax enforcement to immigration enforcement.
According to the Senators’ letter, all of these factors have resulted in “crippled tax enforcement capacity” while “[a]ggressive tax avoidance and abusive schemes are getting more sophisticated.” While abusive tax scheme investigations are time-consuming and labor-intensive, often requiring numerous special agents and Justice Department attorneys, such efforts are highly rewarding, with a substantial return on investment: for every dollar spent on enforcement, IRS-CI returns $16.
The Senators’ letter concludes with a lengthy list of questions about these issues, including the following:
- What is the explanation for the decrease in abusive tax scheme investigations from FY2024 to FY2025?
- How many IRS-CI personnel whose duties include investigating abusive tax schemes left the agency or were reassigned?
- How many IRS-CI special agents have been diverted from traditional tax enforcement to immigration enforcement?
- What steps has IRC-CI taken to mitigate the effects of workforce reductions?
- Has the IRS evaluated the potential deterrent and revenue impacts of the decline in abusive tax scheme investigations?
The letter requests a response by February 27.
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