How IRS Partnership Campaign Succumbed to Rich Taxpayer Pushback

“We pissed off the wrong people.”

The comment from a former IRS employee has become a refrain for agency examiners who saw themselves as rooting out some of the most complex ways wealthy taxpayers dodge taxes—and now have been laid off or sidelined in an agency that’s a shell of its former self.

The IRS for years has had a tough time cracking down on taxpayers’ use of partnerships and other so-called passthroughs to get more, and bigger, deductions. The ranks of senior staffers with the experience to unearth these complex maneuvers swelled under then-President Joe Biden, and by late ...