IRS Budget Cut $1.4 Billion in Trump White House Proposal (2)

President Donald Trump proposed a cut of $1.4 billion in annual funding for the IRS in his fiscal 2027 budget proposal released Friday.

Trump’s budget is a high-level wishlist to Congress of the administration’s priorities and comes ahead of the formal appropriations process. Congress ultimately will be the decision maker on which of these proposals survive.

“The Budget proposes to streamline IRS operations utilizing technology improvements to help focus the IRS on providing high-quality customer service while ensuring the tax laws are fairly administered,” the document said. The administration also highlighted its decision to end the IRS’s free filing tool Direct File and the almost 30% workforce cuts.

Most of the roughly $9.8 billion in proposed annual funding for the IRS is divided into three buckets: $3.13 billion for taxpayer services, $4.1 billion for enforcement, and $2.6 billion for technology and operations support.

Taxpayer services was the only category with a slight increase, from $3.04 billion in 2026, while enforcement and technology saw drops, according to the appendix.

The budget plan comes as the IRS recovers from steep workforce losses and leadership turnover in 2025 and as it prepares to finish up a high-stakes tax season.

For fiscal year 2026, the IRS saw its annual funding cut by $1.1 billion, to $11.2 billion, in a bipartisan budget deal in January. This was down from $12.3 billion in fiscal 2025. The deal also rescinded about $11.7 billion of the remaining extra funds from Democrats’ 2022 tax-and-climate law that was meant to help the agency modernize and go after tax cheats.

The IRS for 2026 avoided deeper cuts that House Republicans and Trump initially sought. Trump last year proposed about $9.8 billion in funding and House Republicans wanted even less, or $9.5 billion. The Senate had sought $11.8 billion for the IRS.

President Trump also proposed cutting funding for the IRS’s watchdog agency, the Treasury Inspector General for Tax Administration to $138 million down from $165 million in 2026. The funding cut is in line with Trump’s 2025 proposal for the watchdog.

TIGTA is an independent group tasked with conducting audits, investigations, and evaluations at the IRS. It is also critical in overseeing how the agency spends extra funding the agency got to modernize and improve customer service.

Friday’s request marks the beginning of negotiations with Congress, which will need to sign off on any changes to the IRS’s discretionary spending before they can take effect.