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The Internal Revenue Service (IRS) is preparing for a significant decline in tax revenue this year, with estimates predicting a drop of more than 10% compared to 2024. This decrease, amounting to over $500 billion in lost federal revenue, comes amid staffing reductions and increased challenges in taxpayer compliance.
According to sources familiar with the projections, the Treasury Department and IRS officials are forecasting a major shortfall in tax receipts by the April 15 filing deadline. Factors contributing to this decline include a growing number of individuals and businesses either avoiding tax filings or attempting to bypass balances owed to the IRS. This situation is being exacerbated by recent staff cuts at the agency, following the Trump administration’s push to reduce IRS operations and workforce.
In 2024, the IRS collected a record $5.1 trillion in tax revenue. However, this year, officials fear that the decreased enforcement capacity and staffing shortages will result in a notable reduction in compliance, further exacerbated by disruptions related to the U.S. Department of Government Expenditure (DOGE) Service.
The predicted loss of more than $500 billion in tax revenue underscores the growing challenges the IRS faces as it continues to grapple with resource constraints and a complex tax landscape. For context, the U.S. government spent approximately $825 billion on defense in fiscal 2024, highlighting the scale of the shortfall relative to federal spending priorities.
Tax experts are warning that this shortfall could have far-reaching consequences for the government’s ability to fund essential services, particularly as the IRS struggles to keep pace with rising tax evasion and underreporting. Officials are already exploring potential measures to mitigate the impact, but a swift recovery in tax receipts remains uncertain.
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