IRS priorities may be shifting under new administration

ARTICLE | April 15, 2025

Authored by FMF&E

Whenever a new administration takes office, it’s common for federal agencies to recalibrate their priorities—and the IRS is no exception. Over the past few years, the agency had been steadily increasing its focus on high-income earners, large partnerships, and complex tax avoidance strategies. But early signs under the new administration suggest the agency’s priorities are shifting. Key positions have been filled by officials with deep backgrounds in financial crimes tied to border security, and broader federal policy has emphasized immigration enforcement and workforce reduction across government. 

So, what does this mean for taxpayers, businesses, and advisors?

What we know so far

Budget cuts and workforce reductions are reshaping the IRS

The IRS had been in the early stages of a major rebuild under the Inflation Reduction Act, with plans to hire thousands of enforcement agents and modernize outdated systems. But much of that funding has since been rescinded or reallocated, and a federal hiring freeze has slowed or reversed progress. Many newly hired specialists have left the agency—some within their first year—leaving gaps in units that had been gearing up for complex, high-dollar audits.

Enforcement resources appear to be shifting toward border-linked financial crimes

While the current administration hasn’t formally outlined its enforcement priorities for the IRS, public statements and leadership changes suggest a growing focus on financial crimes connected to national security and border activity. The recent appointment of Deputy CI Chief Gary Shapley—whose background includes investigating international tax crime and money laundering—is consistent with this trajectory. This suggests that IRS CI may continue directing resources toward financial crimes tied to human smuggling, narcotics trafficking, and employment tax fraud tied to undocumented laborers. While these crimes were already subject to investigation, they may receive more focus under the new administration. 

Large partnership and high-income audits could lose momentum

Under the prior administration, the IRS’s Large Business & International (LB&I) Division was increasing its focus on audits of complex pass-through entities and high-dollar partnerships. That effort is now in question. These types of audits are resource-intensive and require experienced personnel. With attrition and workforce reductions affecting some of the agency’s most specialized teams, it’s uncertain how many of those cases will continue—or whether this category of enforcement will see a meaningful pullback in the coming years.

Automation may fill the gaps

As staffing tightens and manual audits become harder to scale, the IRS is likely to lean more heavily on automated systems to flag returns. That could increase audit activity in areas that are easier to review with algorithms—like smaller business returns, sole proprietors, or individual taxpayers claiming refundable credits. While that may sound like good news for large filers, it also introduces the possibility of more audits being triggered by less precise or oversimplified models.

Practical takeaways for taxpayers and employers

Whether you’re running a business or managing a complex personal return, these changes shouldn’t be interpreted as a green light to relax on compliance. If anything, the current environment increases uncertainty—both in who the IRS will prioritize and how consistently enforcement will be applied.

Here are a few practical takeaways:

• Stay compliant—even if audit odds seem lower. For high-income individuals and complex entities, keep documentation tight and assume scrutiny is still possible, especially for open tax years or previously flagged returns.
• If you employ workers, review your I-9 compliance practices. With increased attention on unauthorized labor and employment tax fraud, ensure all employment eligibility documentation is up to date and properly maintained.
• Don’t underestimate the reach of automated enforcement. Simpler returns may be under more scrutiny, not less, if the IRS relies more on tech-driven review systems.

Looking ahead

The reality is that IRS enforcement priorities don’t stay static for long and may continue to shift as new policy memos evolve. In the meantime, it’s smart to keep your compliance strategy strong, your records clean, and your advisors looped in. Don’t make assumptions based on headlines. Make decisions based on risk management and good planning.

Need help evaluating your audit risk or strengthening your documentation practices? We’re here to help. Reach out to our team to talk through what these changes could mean for you.