The IRS has completed its first full filing season since the Trump administration implemented significant staffing cuts. It’s an early test of whether technology, specifically AI, can offset a dramatically slimmed-down workforce.
Officials maintain that performance hasn’t been affected, citing that 120 million tax returns have already been processed. But the overall picture remains unclear.
Recent findings from the U.S. Government Accountability Office (GAO) suggest that attempting to scale AI while reducing the very workforce needed to support it has caused multiple issues, and that for many tax professionals, the system is evolving too quickly.
The impact of fewer IRS employees
The scale at which the IRS has reduced its workforce is unprecedented. More than 26,000 employees have been cut from the agency since 2025. That equates to almost one in four since the Biden administration.
Further reductions may still be ahead, with plans to cut an additional 4,000 roles, roles which Frank Bisignano, the Social Security Commissioner, says the agency can afford to lose.
However, while the IRS may be able to progress with its current headcount, the GAO has warned that many of the employees who have left the agency specialised in managing AI. In fact, 40% of its IT staff have been let go and the Research, Applied Analytics, and Statistics Unit, one of two teams tasked with leading AI innovation, lost 63 employees.
These cuts will make it harder for the IRS to roll out the necessary AI systems to make up for the shortfall in people power. The cuts are also affecting other departments. This tax season, hundreds of IRS staff from human resources and IT were reassigned to process returns and support customer services.
How is AI being used to ease the pressure?
AI is playing an increasingly central role at the IRS. The GAO reports that the agency now has 126 active AI use cases, a sharp rise from just 10 in 2022.
These AI systems are designed to process large volumes of data, flag anomalies, and prioritize audits. There is also a growing emphasis on taxpayer-facing apps, with AI-powered call centers providing detailed answers to routine questions.
The plan is that by handling repetitive or data-heavy tasks, AI can help the IRS direct its workforce towards more complex tasks. However, AI isn’t a magic bullet. According to reporting by Forbes, while the increased use of AI may help the IRS catch more errors, staffing cuts mean fixing those issues could take longer than ever.
Where does AI still fall short?
AI has clear limitations in the world of tax administration. Tax law requires interpretation, context, and judgment. And while AI can identify patterns or flag mistakes, it still cannot assess intent or nuanced legal scenarios.
Perhaps most concerning is the risk of algorithmic bias. If AI models are trained on historical data, there’s every possibility they could end up perpetuating existing biases. There’s also a real lack of transparency, which could make it harder for taxpayers to understand or challenge why their returns have been selected for auditing.
Equally important is the potential loss of institutional knowledge. As experienced staff leave the agency, the IRS risks losing the expertise needed to test and validate AI systems. Successful implementation still depends on people who understand where these systems can go wrong.
How is AI changing the role for tax professionals?
As the IRS leans more heavily on automation and AI becomes more embedded across the industry, firms are increasingly focused on reducing time spent on repetitive preparation work, using automation to streamline workflows and free up capacity for higher-value advisory services. At the same time, reduced access to IRS personnel is pushing more clients to rely on advisors for guidance.
There’s also a clear evolution in skills. Tax professionals are increasingly finding themselves interpreting the outputs of AI, which means needing a better understanding why algorithms might flag a return, rather than human being, as well as spotting potential ‘hallucinations’.
As the IRS focuses more of its resources on higher-risk areas of non-compliance, professionals are also facing increased scrutiny around higher-income earners and digital assets, adding further pressure to maintain ethical standards and thorough documentation.
Looking ahead
The IRS is attempting to do more with less, and while the long-term impact of these changes is still unfolding, one thing is clear. The role of technology and AI in tax administration will only continue to grow.
Whether that approach proves sustainable will depend on how effectively automation is balanced with the expertise needed to support it. AI can improve efficiency and expand oversight, but it still relies on the people who build, manage, and interpret it.
For tax professionals, the environment is becoming more complex and, at times, less transparent. As a result, their role is evolving alongside the system itself, with greater emphasis on interpretation and judgement to guide clients through uncertainty.
In the years ahead, success is unlikely to come from technology or workforce changes alone, but from how well the two are aligned.
