Impact of Staffing Cuts on IRS's AI Capabilities

A recent audit by the Government Accountability Office (GAO) highlights significant setbacks in the Internal Revenue Service's (IRS) ability to leverage artificial intelligence (AI) due to staffing cuts initiated during President Donald Trump's administration. The audit indicates that these reductions have severely impaired the agency's capacity to manage existing AI tools and pursue new AI initiatives.

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The IRS's procurement office, responsible for AI contracts, experienced a 40% reduction in staff last spring. This staffing crisis extended to the agency's chief technology officer, who suspended 10 of 11 AI projects following the departure of half the team. Additionally, the IRS's research and analytics unit lost 63 employees focused on AI, creating a "skills gap" that the GAO warns may be difficult to close. The audit concluded that these staffing changes have significantly affected the IRS's ability to develop, procure, and utilize AI technologies.

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As of June 2025, the IRS reported a dramatic increase in AI use cases, rising from 10 projects in 2022 to 126. However, only 49 of these projects are operational, with the remainder in various stages of development or testing. The operational projects include 14 focused on internal operations, 18 on tax compliance and fraud detection, and 17 aimed at enhancing taxpayer services. The GAO noted that the reduction in audits has also limited the data available for training AI models, further constraining the agency's capabilities.

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In response to the GAO findings, IRS CEO Frank Bisignano acknowledged the "significant changes" in staffing and strategic priorities but emphasized the agency's commitment to meeting federal AI standards. Congressional Democrats, including Representatives Terri Sewell and Linda Sanchez, criticized the staffing cuts, arguing that they have left taxpayers worse off and hindered the IRS's modernization efforts. They stated, “By hollowing out the very experts responsible for building and overseeing the tools to modernize the IRS, this administration has undermined both innovation and accountability.”

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The IRS's challenges in utilizing AI effectively raise concerns about the agency's ability to meet taxpayer needs and enhance operational efficiency. As the agency navigates these staffing issues, the future of its AI initiatives remains uncertain, potentially impacting its overall effectiveness in tax administration.

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• “IRS’s capacity for using and overseeing its large inventory of AI was significantly affected in 2025 amid changes to resource levels and government-wide guidance,” — Government Accountability Office

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• “The GAO has just confirmed what we’ve always argued: gutting the workforce at the IRS leaves taxpayers worse off and pushes the agency even further into the dark ages,” — Rep. Terri Sewell

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• “In this evolving environment, IRS remains dedicated to meeting and exceeding all authoritative standards for federal use of AI,” — Frank Bisignano, IRS CEO

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