Accountancy Slice

North America

The IRS’s proposed 2027 budget would further reduce funding and staffing, cutting discretionary spending to $9.8bn and eliminating roughly 4,000 additional jobs, with enforcement functions bearing the brunt of the reductions. Combined with prior cuts, enforcement staffing is set to fall sharply, particularly in audits and collections, prompting concerns about declining audit coverage and reduced deterrence against noncompliance. To compensate, the agency is expected to rely more heavily on automated, data-driven tools such as income matching programs, which are less resource-intensive but tend to focus on simpler cases rather than complex, high-value audits. While taxpayer services funding and staffing would see modest increases to handle rising demand and new tax provisions, spending on technology and operations would also decline, despite the IRS’s stated goal of modernizing through AI and advanced analytics. Officials argue the changes will improve efficiency and reduce costs, but critics warn that scaling back enforcement, historically a high-return activity, could ultimately reduce tax revenue and shift the burden of compliance unevenly, particularly away from higher-income taxpayers, while also straining the agency’s ability to manage growing workloads.