The number of criminal referrals made by the US Internal Revenue Service (IRS) against large corporations and ultrawealthy taxpayers has dropped dramatically during the first year of President Donald Trump’s return to the White House, according to newly released data obtained by the International Consortium of Investigative Journalists (ICIJ). The figures suggest a sharp slowdown in the federal government’s pursuit of potential tax evasion among the richest Americans and major corporations, raising concerns among tax experts and former officials about enforcement capacity and fairness in the US tax system.

The data indicates that the IRS referred at most two cases of suspected tax evasion involving ultrawealthy individuals or large businesses to criminal investigators during fiscal year 2025. This represents a steep decline compared with previous years and reflects a broader shift in enforcement priorities following extensive budget cuts and staffing reductions across the agency.

Criminal referrals are a critical step in the tax enforcement process. They occur when IRS civil auditors identify evidence suggesting that a taxpayer may have intentionally violated tax laws and refer the case to the agency’s Criminal Investigation division for potential prosecution. While not every referral results in charges or convictions, the number of referrals often serves as an important indicator of how aggressively the IRS is investigating complex tax avoidance schemes.

The sharp decline highlights what many observers view as a reversal of policies pursued during the administration of President Joe Biden, which had sought to increase scrutiny of wealthy taxpayers and multinational corporations. Under that earlier effort, the IRS received additional funding aimed at strengthening enforcement capabilities and hiring specialists skilled at unraveling complicated financial structures often used by high-net-worth individuals.

Danny Werfel, who served as IRS commissioner from 2023 to 2025, said the data illustrates how cuts to the agency’s resources can weaken its ability to hold powerful taxpayers accountable.

“When the IRS budget and staff is cut, your taxes don’t go down,” Werfel said after reviewing the figures. “Instead, those that choose not to play by the rules shift the burden of funding our government to those that do. The apparent sharp reduction in the inventory of IRS criminal fraud referrals is a textbook example of that.”

The decline comes amid sweeping cost-cutting measures and restructuring within the IRS after Trump’s return to office. Early in the administration, significant reductions in funding and personnel were implemented as part of broader efforts to reduce federal spending. Critics say those decisions have left key enforcement units severely understaffed.

According to IRS personnel who spoke previously with investigative reporters, the agency’s Large Business and International Division – responsible for auditing major corporations and the wealthiest taxpayers – has been particularly affected. Agents assigned to review billionaire tax returns reported that several investigations stalled when teams were dismantled, budgets frozen, and cases left without sufficient staff to continue complex audits.

The newly disclosed referral figures are among the first publicly available enforcement indicators from that division since the start of Trump’s second term. They suggest that enforcement activities targeting sophisticated tax schemes may have slowed significantly.

Michael Welu, a former IRS agent who spent much of his career helping auditors identify cases suitable for criminal prosecution, said the process of preparing a criminal referral requires time, resources and extensive documentation. When audit teams are overwhelmed or understaffed, those referrals become far less likely.

“Overworked audit teams focus on closing cases as efficiently as possible,” Welu explained. “Crafting a criminal referral takes extra effort and careful preparation. If there aren’t enough investigators, that step is often skipped.”

Without criminal prosecution as a realistic threat, experts warn that wealthy taxpayers who push the boundaries of tax law may face little deterrent. In many cases where wrongdoing is identified through civil audits, the outcome is limited to financial penalties or negotiated settlements rather than criminal charges.

Economists and government analysts have long argued that enforcement against high-income tax evasion is critical because wealthy individuals account for a disproportionately large share of unpaid taxes. The US Treasury Department has previously estimated that sophisticated tax avoidance schemes by the richest Americans contribute significantly to the nation’s “tax gap,” the difference between taxes owed and taxes actually collected.

Critics say that weak enforcement can worsen economic inequality by allowing the richest taxpayers to reduce their obligations while ordinary wage earners have taxes automatically withheld from paychecks.

The situation has been compounded by substantial staff losses in specialized units tasked with auditing billionaires. The IRS’s Global High Wealth office – a unit within the Large Business and International Division dedicated to examining complex financial arrangements used by extremely wealthy individuals – reportedly lost about 38 percent of its staff within weeks of the new administration taking office.

Many of those employees had been hired during the previous administration’s push to strengthen enforcement capabilities. Because they were relatively recent hires, they were among the first to lose their positions when layoffs were implemented.

Before the staffing cuts, the office had expanded significantly in order to recruit experts capable of analyzing intricate tax structures, offshore accounts, and corporate arrangements often used by ultrawealthy taxpayers. Losing such specialists, critics argue, undermines the agency’s ability to investigate complicated financial strategies designed to minimize tax liability.

The new data does not clarify whether the two criminal referrals recorded in fiscal year 2025 were initiated during the final months of the Biden administration or after Trump took office. Fiscal year 2025 began in October 2024, a period that overlapped with the presidential transition.

However, the statistics show that between October 1, 2025, and January 31, 2026, the Large Business and International Division made no criminal referrals at all related to ultrawealthy taxpayers.

The last time the number of referrals fell this low was in fiscal year 2019, during Trump’s first presidency.

Despite earlier criticism that the division had sometimes been too lenient toward wealthy taxpayers, enforcement activity had begun to increase slightly in the years preceding the latest cuts. After receiving additional funding from Congress, the IRS made seven criminal referrals in both fiscal year 2023 and fiscal year 2024.

That modest increase had been seen by some policymakers as an early sign that the agency was rebuilding its ability to pursue complex financial crimes involving wealthy individuals and multinational corporations.

Robert Warren, a former IRS agent who is now an assistant professor of accounting at Radford University in Virginia, said the decline in referrals is not surprising given the scale of recent staff reductions.

“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 newly released data or the broader implications for enforcement.

Still, the figures are likely to intensify debate in Washington over the future of the agency and the role of tax enforcement in addressing economic inequality. Supporters of stronger enforcement argue that adequate funding for the IRS is essential to maintaining fairness in the tax system and ensuring that wealthy individuals and corporations follow the same rules as ordinary taxpayers.

Opponents of expanding the agency’s budget, however, have long argued that a larger IRS could place unnecessary burdens on businesses and individuals.

As policymakers continue to debate the appropriate level of funding and oversight, the latest figures suggest that enforcement against complex tax evasion – particularly among the richest taxpayers – has slowed significantly during the first year of Trump’s renewed presidency. Whether that trend continues may depend largely on future decisions about the IRS’s resources, staffing levels and investigative priorities.

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