The Internal Revenue Service (IRS) is rapidly increasing its use of artificial intelligence (AI) to manage tax administration, even as taxpayer complaints about digital services and concerns over privacy and fairness grow. The agency now uses more than 60 different AI tools, up from 49 last year, to help process returns, detect fraud, and improve efficiency, according to the Treasury Department’s newly released AI use case inventory. Many of these tools are still in early stages of deployment, but they represent a significant shift in how the IRS operates as it copes with deep staffing cuts and ongoing modernization challenges.
The surge in AI use across the Treasury Department is being driven primarily by the IRS, which is relying on automation to fill gaps left by staff reductions. One of the most advanced new tools, the “IRS IaaP Accelerator,” will use AI personas to identify compliance failures and security issues in IRS systems, with all decisions reviewed by human employees. Another tool aims to reduce paper backlogs by using AI to route scanned mail and tax returns more efficiently, supporting the IRS’s “Zero-Paper Initiative.”
As described in a National Conference of State Legislatures (NCSL) report, AI systems can unintentionally amplify historical biases in audits, possibly leading to unfair scrutiny of certain groups. Privacy concerns are also rising, as digitized tax data becomes a more attractive target for cyberattacks and unauthorized access. The NCSL notes that while AI promises greater efficiency, it also raises questions about due process, transparency, and the ability of taxpayers to challenge automated decisions.
Bill Handel warned that with these new tools, the IRS will start going after more and more taxpayers, especially those who work side gigs, looking for any mistakes or unreported income.