The US Internal Revenue Service (IRS) has announced a “strategic pause” in its technology modernisation initiatives to re-evaluate its approach considering emerging AI technologies, reported Reuters citing a senior IRS technology official.
Among the initiatives under review is the Direct File system, a free tax filing platform launched in 2024.
The decision to halt further investments comes as the IRS is examining how AI can be integrated to enhance efficiency and operations.
The pause coincides with reports of potential workforce reductions with the agency planning to cut between 20% and 25% of its 100,000 employees.
However, the IRS official stated there is no set target for staff reductions, describing the review as an opportunity to “realign the workforce to those new ways of doing business.”
US Treasury Secretary Scott Bessent has previously expressed confidence in AI’s role in improving tax collection and customer service.
However, he has not specified any budgetary or staffing implications related to AI adoption.
The IRS relies on external contractors for technology upgrades.
The evaluation is not expected to impact the 2025 tax filing season, with the IRS continuing to process tax returns and issue refunds as scheduled.
This development is the latest shift in IRS investment strategy following the 2022 Inflation Reduction Act, which initially allocated $80bn over a decade for modernisation, customer service, and tax enforcement.
During the past two years, the IRS has introduced several technological upgrades, including AI-powered customer service chatbots, document scanning technology for processing paper tax returns, and early-stage efforts to replace its outdated IT infrastructure.
