IRS Technology Pause Amid AI Revolution

The IRS has announced a 'strategic pause' in its technology modernization efforts to reassess its operations in light of new AI advancements. This review may realign its workforce, with potential staff reductions, while maintaining tax services for the 2025 filing season despite funding cuts.

The U.S. Internal Revenue Service (IRS) is taking a 'strategic pause' from its ongoing technology modernization investments to re-evaluate its operational approach amidst advancements in artificial intelligence, according to a senior career technology official. This pause will involve a comprehensive review of recent initiatives, including the Direct File system for tax returns implemented under the Biden administration.

Amid potential large-scale workforce reductions planned by the Trump administration, an inside source revealed intentions of the IRS to potentially eliminate 20% to 25% of its workforce. However, the official emphasized that no specific numbers have been finalized, framing the pause as an opportunity to align with new business methodologies.

U.S. Treasury's Scott Bessent remains optimistic about leveraging the 'great AI revolution' to boost tax collections and customer service, despite lacking a specific budget or staff reduction target. The IRS's technological infrastructure, largely outdated and reliant on external contractors, is being scrutinized to overcome past challenges and transition to a modernized state.

(With inputs from agencies.)