The IRS Embraces AI in Response to Workforce Reductions and Budget Cuts
The Internal Revenue Service (IRS) is adopting artificial intelligence (AI) to tackle considerable staff shortages resulting from the layoff of thousands of tax agents. During an oversight hearing on May 6 before the House Appropriations Committee, U.S. Treasury Secretary Scott Bessent detailed the agency’s approach to increasingly depend on AI technologies as it confronts ongoing budget and workforce cuts.
Bessent noted that the IRS is bracing for additional downsizing, with the Treasury’s recent budget proposal suggesting the removal of another 40,000 positions. To sustain tax collection effectiveness in light of these reductions, the agency aims to intensify its utilization of AI tools. “I believe that with smarter IT and this AI boom, we can improve collections,” Bessent remarked. “I anticipate collections will stay strong, just as they were this year.”
According to a statement given to The Register, the IRS already utilizes AI in several operational domains, such as compliance enforcement, fraud detection, and taxpayer services. Bessent also pointed out that the proposed cuts to the agency’s IT budget could present a chance to modernize outdated systems and eradicate unnecessary expenses.
The workforce reduction forms part of a larger initiative led by the Department of Government Efficiency (DOGE), which is driven by Trump appointee Elon Musk. DOGE has aimed to reduce the IRS staff by at least 40 percent, and internal communications have reportedly cautioned employees about biweekly Reduction in Force (RIF) notifications. A recent report from the Treasury Inspector General for Tax Administration (TIGTA) indicated that between January and March, around 31 percent of revenue agents—approximately 3,600 auditors—have been laid off or accepted buyout packages.
The IRS is not the only agency undergoing an AI transformation. Various federal entities are increasing AI adoption in accordance with President Trump’s executive orders and updated federal policies that emphasize AI integration. The Department of Defense, the Food and Drug Administration (FDA), and the Department of Health and Human Services (HHS) are among those accelerating their implementation of generative AI technologies.
In February, Musk revealed plans for an AI chatbot aimed at analyzing government contracts and enhancing productivity within the U.S. General Services Administration (GSA). DOGE has also initiated a project focused on deploying AI agents throughout federal agencies. However, this effort has faced backlash, with claims that DOGE has employed AI tools to surveil internal communications among federal workers, including those at the Environmental Protection Agency (EPA).
As the federal government continues to downsize and digitize, the IRS’s shift towards AI signifies a larger trend of harnessing technology to sustain operations amid diminishing budgets and workforce numbers.