Given the current regulatory climate, the release of a GAO report reviewing AI use at the IRS may seem puzzling. That riddle is solved by the provenance of the report—a request made in March 2024 by Bill Pascrell, Jr., then-ranking member of the U.S. House Committee on Ways and Means.
The request outlined three objectives: to describe how the IRS is using AI and for what purposes, to assess whether the IRS has processes that ensure accountability, and to identify the challenges the IRS faces as it rolls out AI across the agency.
Between the time of the review request in 2024 and the delivery of the GAO report, there have been significant changes in the IRS regulatory environment. Overall, the report describes an agency that is using AI, but perhaps less strategically than taxpayers might assume. Here are some points of the report:
The IRS is currently using AI for essentially three types of services. Customer service (24%) to taxpayers has been boosted by the use of chatbots. AI is also used to enhance operations (59%), such as generating meeting minutes. In addition, compliance-related uses (43%) include identifying potential tax fraud and assisting with IRS audits.
The GAO found that the IRS does not have a comprehensive plan for developing AI tools and lacks sufficient staff with the necessary technical skills. The report notes that the IRS lost 20% of its staff in 2025, including 63 workers in the IRS Research, Applied Analytics and Statistics Group who were involved in AI-related work. This is the group charged with the use, development, and oversight of AI tools. Budget is once again a challenge for aging technology and the expansion of new tech, like AI.
When examining use cases, the GAO noted that certain AI tools intended to assist in detecting tax crime and supporting IRS tax investigations could not be located in the IRS inventory. However, AI models trained on return and audit data may still help the IRS identify candidates for further review. For additional context on audit procedures, see our tutorial on IRS audits.
The GAO made a number of recommendations with which the IRS agreed. The recommendations discuss identifying skills gaps to address for improving the use of AI, developing a comprehensive quality assurance process for AI tools, and identifying how AI use cases align with strategic goals and more.
The GAO ultimately found the IRS is using AI but has not developed goals, plans or the workforce to make full use of its current capabilities. As noted by the GAO, “Identifying and developing a plan to address AI skills gaps will be critical if IRS is to support its AI efforts and continue increasing its use.”
The full impact of AI on tax compliance remains uncertain. However, the IRS is already using data and automation tools to refine how it identifies potential tax issues, including payroll tax problems, tax fraud, and offshore tax reporting concerns. These developments may influence how taxpayers are selected for IRS audits or further review.
If you have questions about compliance risks or concerns related to IRS audits or tax investigations, contact Robert J. Fedor, L.L.C. at 440-250-9709. The firm advises individuals and businesses on matters involving tax fraud, tax crime, and related enforcement actions. With offices in Cleveland and Chicago, the firm serves clients throughout the U.S. and internationally.