Tax season is here again this year. As you prepare to fill out forms and file your annual tax return this season, you may have questions or need additional assistance. The IRS is embracing artificial intelligence as a tool to improve the taxpayer experience. AI is also being used to select tax returns for audit, root out tax fraud, and improve general operations.
In a new report, we looked at how the IRS is using AI and what it means for you. Today’s WatchBlog post features our report.
How is the IRS leveraging artificial intelligence?
The IRS has been using AI for years. But recently, there has been an increase in AI tools that taxpayers can interact with, such as voicebots that answer taxpayer questions over the phone.
As of last summer, the IRS had 126 active AI use cases. This refers to the application of AI to specific business or operational needs. Each use case primarily falls into one of three buckets: taxpayer services (e.g., chatbots), operational efficiency (e.g., automated meeting summaries), and tax compliance and fraud detection (e.g., audit selection assistance). Most of these applications were still in development as of last summer. However, some were operational.
IRS use of artificial intelligence by category and status (in development or operational)
How is AI improving IRS operations and the taxpayer experience? As with any new technology, the use of AI comes with concerns such as privacy and surveillance. There are several reports on how the federal government is balancing advances in AI with these concerns. But today, we’re focusing on how the IRS aims to use AI to move faster and, in some cases, reduce staff workload. for example,
- Quickly answer common taxpayer questions. Voicebots and chatbots allow taxpayers to obtain information about their accounts, refund status, outstanding balances, payment plans, and other routine questions. This could allow staff to answer taxpayers’ more complex questions.
- IT modernization. The IRS has some very old IT systems, including systems that use a 60-year-old coding language. Several AI tools are aimed at helping the IRS understand its outdated code and rewrite it in modern coding languages. The IRS said this will allow it to modernize IT systems much faster than without the use of AI.
- Workload prioritization. AI is being used to review large amounts of tax and other data to help staff identify which tasks to prioritize. AI can also help identify filings that are at the highest risk of tax violations and may require immediate attention.
Examples of how AI can help with tax compliance and fraud detection
What does the future hold for the IRS’s use of AI?
IRS officials say they plan to continue using and expanding AI to find new ways to improve the taxpayer experience and agency operations. However, recent changes in funding and staffing may hinder these efforts.
Funding will change. In 2022, the IRS received $79.4 billion to help modernize its operations, including AI. Subsequent legislation reversed or prohibited the IRS from disbursing more than half that amount, reducing it to $25.9 billion. As a result, the IRS must evaluate which AI tools will provide the agency with the greatest return on investment.
Staffing will change. In 2025, the IRS lost about 20% of its staff. These significant headcount reductions could have a significant impact on the IRS’s ability to develop and utilize AI. For example, officials with the IRS’ Research, Applied Analysis, and Statistics Group, which supports the development, monitoring, and use of AI, said they lost 63 employees who worked on AI full-time or part-time.
As the IRS works to overcome these challenges, there are steps it can take to improve its AI efforts. First, the IRS could improve the quality of information contained in its inventory regarding the use of AI. For example, we found that in more than 25% of use cases, the IRS does not state how AI is expected to benefit the agency. It also discovered several AI tools that authorities said are being used to pursue criminal proceedings against tax fraud. However, these tools were not in the IRS inventory.
Similarly, the IRS should consider its overall oversight of AI. This includes how investments in AI are managed across the agency to ensure that the use of AI contributes to agency-wide goals. We have made recommendations to the IRS on steps that can be taken to address these and other issues.
To learn more about the IRS’s use of AI, read the full report.
- GAO’s fact-based, bipartisan information helps Congress and federal agencies improve government. WatchBlog allows us to contextualize GAO’s efforts a little more for the public. See more posts at GAO.gov/blog.
