Washington D.C. – Scrutiny of tax evasion by the wealthiest Americans and large corporations has significantly decreased in the first year of Donald Trump’s second administration, according to fresh data obtained by the International Consortium of Investigative Journalists (ICIJ). The IRS referred at most two cases of possible tax evasion to its criminal investigators, a sharp decline from previous years and a reversal of efforts to increase oversight during the prior administration. This shift raises concerns about the enforcement of tax laws and the potential for increased economic inequality.
The dramatic reduction in criminal referrals underscores a policy change from the Biden administration, which had prioritized increased IRS scrutiny of high-net-worth individuals and sizeable businesses. 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 “textbook example” of this phenomenon.
IRS Staffing and Budget Cuts
The decline in referrals coincides with substantial cuts to the IRS budget and staffing levels. Early last year, IRS agents assigned to audits of billionaires reported that their cases stalled as teams were reduced and budgets were frozen, a cost-cutting effort reportedly led by Elon Musk. The new referral numbers represent the first enforcement data released by the agency’s Large Business and International (LB&I) Division during Trump’s second term, the division responsible for auditing large corporations and billionaires. The Global High Wealth office, within the LB&I division, experienced a particularly significant impact, losing 38 percent of its staff within weeks of the new administration taking office, according to ICIJ reporting last year.
Experts emphasize that while not every referral leads to prosecution, they are a crucial indicator of how aggressively the IRS is investigating complex tax avoidance schemes. The U.S. Treasury Department has previously stated that the wealthiest Americans are responsible for a disproportionately large share of tax cheating, and sophisticated evasion schemes contribute to growing economic inequality. Without criminal referrals, the consequences for tax evasion often amount to civil fines, which many experts believe are insufficient to deter illegal behavior.
Michael Welu, a former IRS agent specializing in identifying major cases for potential prosecution, explained that overworked and understaffed audit teams are less likely to dedicate the necessary time to build a strong criminal referral. “Unless we start treating illegal schemes as what they are, there’s no incentive to stop,” Welu said.
Referral Numbers and Historical Context
The current number of criminal referrals is the lowest it has been since fiscal year 2019. In contrast, the LB&I Division made seven referrals in both 2023 and 2024, following a period of increased funding. The data does not clarify whether the two referrals made in fiscal year 2025 (beginning in October 2024) occurred under the Biden or Trump administration. No cases of potential tax cheating by ultra-wealthy individuals were referred to criminal investigators between October 1, 2025, and January 31, 2026.
Robert Warren, a former IRS agent and assistant professor of accounting at Radford University in Virginia, noted the logical connection between staffing levels and referral rates. “It’s logical to expect a drop in referrals when you have so few agents,” Warren said. “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.”
The IRS declined to comment on the matter.
The decline in IRS enforcement actions targeting the wealthy comes as concerns grow about tax fairness and the funding of government services. The situation highlights the ongoing debate over the appropriate level of resources dedicated to tax enforcement and the potential consequences of underfunding the agency. What remains to be seen is whether this trend will continue and what impact it will have on the long-term collection of tax revenue and the equitable application of tax laws.
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