IRS ramps up AI use amid staff cuts, Treasury inventory shows

In the wake of thousands of cuts to the IRS’s staff, Treasury Secretary Scott Bessent told lawmakers last spring that an “AI boom” would help make up the difference. The release this week of the department’s AI use case inventory provides a glimpse into how that’s playing out.

The Treasury Department has more than doubled its AI use cases over the past year, jumping from 54 in its 2024 inventory to 129 now. That nearly 139% increase was fueled in large part by the IRS and its 61 use cases, which is up from 49 a year ago. The next highest Treasury component is the Office of the Comptroller of the Currency, with 26 AI uses.

At least 16 of the tax agency’s AI use cases involve IT — a job classification that has shrunk 16% since the beginning of the Trump administration, according to a Treasury Inspector General for Tax Administration memo on the 2026 filing season released this week.

Of those 16 AI uses, just one is categorized by Treasury as “high-impact” — a designation under the Trump administration that was called “rights- and safety-impacting” under former President Joe Biden. 

The high-impact use at the tax agency is an agentic AI tool referred to as the “IRS IaaP Accelerator,” which “embeds AI Personas (Architect, Engineer, Product Manager, Security Generative Pre-trained Transformer (GPT)) into the delivery pipeline” and “delivers recommendations, explanations, generated artifacts, and bounded decisions across L1–L3, with human-in-the-loop accountability at all levels,” according to the inventory.

The tool — which is still in the “pre-deployment” stage — would be used to identify compliance failures, security drifts and guardrail violations in cloud infrastructure code. Once those issues have been flagged, the accelerator “produces audit-ready narratives combining telemetry and policy outputs” that IRS employees can then review.

Treasury lists one other agentic AI tool for the IRS, and it’s one that targets a particularly intractable problem: eliminating the flow of paper into the tax agency. In April 2025, the IRS kicked off its Zero-Paper Initiative, which was intended to expand scanning and the digital processing of paper-based returns.

In an annual report to Congress released Wednesday, the National Taxpayer Advocate noted that the IRS’s goal of mostly paperless processing would be “unattainable” for 2026 due to issues with vendors that shifted the “majority” of paper returns to in-house manual processing.

The “Zero Paper AI Routing for Digitalization” tool, which is also in the pre-deployment stage, appears aimed at getting the initiative back on track. According to the inventory, the tool leverages AI to make routing decisions on mail submissions from taxpayers after scanning occurs, a move that the IRS says would “support routing at record processing time or as a tool to generate routing logic dictionaries.”

Benefits of the tool, per the inventory, are reduced bottlenecks, improved pattern recognition, error reduction, the ability to handle large volumes of documents and “dynamic adaptation.” 

“The system will be able to easily adjust to the addition or removal of downstream systems or changes in routing processes without requiring significant system overhauls,” the inventory states.

AI tools that have already been deployed by the IRS include natural language processing to answer employee questions, a machine-learning model to process Form 990-N submissions, a synthetic data engine to test tax-processing systems and simulate fraud cases, a modular code assistant for automation test application development, and a generative AI program to process IT service desk tickets. 

The synthetic data engine is one of two AI tools in use by the IRS that has a fraud-fighting component to it. The other is a confidence threshold tool that assesses the output of multiple machine-learning models to flag possible fraud, which is then reviewed by a human.

Though the IRS’s AI use-case tally climbed 24% year over year, there was at least one area that didn’t carry over to 2025. When Bessent appeared before the House Appropriations Committee last May, he said “smarter IT, through this AI boom” would be used to “enhance collections.” 

A search of the IRS’s AI use case inventory for “collections” and “enforcement,” however, returned zero results. The IRS’s 2024 inventory listed a “collections chatbot” and an AI-based transcription tool for “law enforcement recordings.”

The Treasury Department did not respond to a request for comment by the time of publication.