This version of the article first appeared on CNBC’s Inside Wealth Newsletter. This is Robert Frank, our weekly guide to Net-Worth Investor and Consumer. Sign up to receive future editions directly in your inbox. Wesley Stanovsek was the IRS dream employer in 2024. With $80 billion in new funding from Congress, the IRS went shopping for young tech-savvy accountants and engineers who can dismantle the complex returns of wealthy and private companies. Based in Columbus, Ohio, Stanovsek specializes in S-Corps, trusts and partnerships before being hired in the IRS’ highwells division. He was fired in February, and other IRS agents were considered “trials” within a year. At the time, Stanovsek was working on three so-called “companies” cases. The two involved partnerships and owners of wealthy sports teams, including potential additional taxes totaling millions of dollars. When he left, the case was dropped due to a shortage of staff. “They are likely to close without changing,” Stanovsek said. Wealthy taxpayers and lawyers are struggling to navigate the new administration as the IRS is expected to lose about a third of their staff after the shooting and acquisition. The advantages of high-income earners are clear. With fewer agents, you can see that there are fewer audits and reviews. Under the Biden administration, the IRS worked together to target wealthy people, aiming to launch a campaign to double the audit fees for people making more than $10 million a year, and investigate private owners. Nowadays, tax enforcement ranks are rapidly decreasing, particularly due to the possibility of dismantling the Department of Justice’s tax department. “Agents are like zombies now,” said Kathleen Pakkenham, partner at Vinson & Elkins. “There’s no brain responsible for what’s going on on the ground,” the lawyer says many of their audits have become darker. Many are expected to expire without caution due to the valuation restrictions law, which usually limits taxes to three years after they are filed. Some wealthy taxpayers even ask lawyers and accountants if they should plague returns. Answer: Yes. The IRS has historical data on all taxpayers that they have filed so far, so if they haven’t filed in a year, the IRS’ automation system’s audit flag will quickly rise. More likely than a full boycott, according to lawyers, is a new era in which taxpayers and their accountants push envelopes with aggressive tax collection techniques that could escape reviews of understaffed institutions. Pakenham said the IRS budget cuts in 1999 and 2000 led to a wave of esoteric tax structures that proved illegal over a decade later. “This is exactly the kind of environment in which tax shelters are invented, sold and implemented more widely,” she said. A Yale Budget Lab study found that if IRS staff endure the next 10 years, tax revenues will drop at least $160 billion over the next 10 years. Other reports estimate that more than $500 billion in revenue has been lost this year alone. Former IRS agents and tax lawyers say the specific nature of recent cuts has a major impact on collections from wealthy people. Jack McCunber is a real estate and business appraiser with a background in information systems, and then the IRS was hired by large corporations and international units to audit large individuals and businesses with assets of more than $10 million. Before he was fired, he was working on a total of more than $150 million in problematic taxes. Some are related to syndicated conservation easements that the IRS has included in its 2024 “Dirty Dors” tax system list. McCumber said the majority of his LB&I teams are new hires at agents who were quickly fired. This group had one of the highest return on investment in the IRS. He said every 33 cents the group spent on enforcement, he made an additional $100 in revenue. At the same time as the IRS audit and enforcement decline, accountants and tax attorneys said there is a high possibility that agents are less capable of providing decisions and documents that can resolve tax issues. Hash Blackwell’s partner Robert Romaschko has been audited by the IRS in one audit. The appeals officer said “usually it is due to a taxpayer shortage.” Everyone on the IRS responded, “It was a nightmare,” Romasico said. “It should be easy.” IRS officials are also important to help with delays in their applications. Many wealthy investors have the investments needed for overseas bank accounts or disclosures, but often take several months to receive them. Typically, agents help resolve the delay without penalty. But the IRS with fewer people allows automated systems to take over and perhaps impose a tax lien on client assets, Romashko said. “There are areas where we need services. Otherwise things will disappear into a black hole,” he said. The Treasury Department, which oversees the IRS, told CNBC in March that the cost reductions at the agency would not affect the collections. In fact, he said AI and other new technologies will make agents more efficient and even do better work with collections and services. “I have three priorities for the IRS,” Bessent said at the time. “Collections, privacy, customer service – in that order. So, we have nothing to do to hurt our collection over time. We are in the middle of this amazing AI boom. And you know, I think it’s going to be the wrong time now, as private companies move to AI. Lawyers say they have met some AI agents in the IRS and mixed results. AI is very effective at selecting the type of return that could include certain types of abuse and strategies. “Usually, for an auditor, it’s like opening a closet door and starting to dig and ask questions,” Pakhenham said. “Now it appears they have an X-ray vision. They already knew some of the things in their closets.” However, once the issues were discovered, the lawyer said it would take a very skilled auditor with years of experience to ask appropriate follow-up questions and make a decision. “As a human, you can reason and explain,” Romasico said. “If AI reaches the wrong conclusion, it’s much harder to swing it. You can’t talk to a computer.”
On April 11th, 2025, we walked past the Internal Revenue Service (IRS) building in Washington, DC, USA, and in the rain.
Jonathan Ernst | Reuters
This version of the article first appeared on CNBC’s Inside Wealth Newsletter. This is Robert Frank, our weekly guide to Net-Worth Investor and Consumer. Sign up to receive future editions directly in your inbox.
Wesley Stanovsek was the IRS dream adoption in 2024.
With $80 billion in new funding from Congress, the IRS has shopped for young, tech-savvy accountants and engineers who can dismantle the complex returns of wealthy and private companies. Based in Columbus, Ohio, Stanovsek specializes in S-Corps, trusts and partnerships before being hired in the IRS’ highwells division.
He was fired in February, and other IRS agents were considered “trials” within a year. At the time, Stanovsek was working on three so-called “companies” cases. The two involved partnerships and owners of wealthy sports teams, including potential additional taxes totaling millions of dollars.
When he left, the case was dropped due to a shortage of staff.
