A group of Senate Democrats and the Treasury Inspector General for Tax Administration are raising questions about the impact of deep funding cuts at the Internal Revenue Service this tax season.
The top Democrat on the Senate Finance Committee, ranking member Ron Wyden, D-Oregon, joined by nine of his Senate colleagues, warned the Trump administration that its cuts to the IRS's budget and staffing would disproportionately increase the audit rates of lower-income taxpayers, while increasing the agency's reliance on artificial intelligence for tax audits.
"As we debate funding levels, no one has to theorize about the likely effects of steep budget cuts on IRS enforcement," the senators wrote in a
In their letter, the senators pointed out that recent cuts have slashed IRS resources and driven away more than a quarter of the revenue agents who specialize in tax enforcement of wealthy individuals and large businesses, including partnerships and corporations. The Trump administration has also retasked many IRS Criminal Investigation agents to anti-immigrant assignments, taking them away from their typical duties combating terrorists, drug dealers, human traffickers and ultra-wealthy tax evaders.
The senators also pointed out that the previous time when Congress slashed IRS resources, between 2010 and 2021, taxpayer service crumbled and audit rates for millionaires and billionaires declined 77%. Audit rates for corporations were cut in half. Over 100,000 high-income individuals chose to violate the law by failing to file tax returns and faced no consequences until Congress launched a new enforcement effort years later.
TIGTA memo
Separately, on Tuesday, the Treasury Inspector General for Tax Administration released a
"Efforts to hire filing season employees were delayed due to the government shutdown and changes to the hiring process within the Department of the Treasury," said the memo. "Lastly, new efforts to modernize tax administration are delayed and their expected efficiencies may not occur during the upcoming filing season."
TIGTA noted that as of October 2025, the IRS had lost approximately 19,000 (19%) of its employees due to federal workforce reduction efforts, while the key filing season programs lost approximately 8,300 (17%) employees. The programs are responsible for processing original and amended tax returns, resolving tax return errors, assisting taxpayers on the telephone and in-person, stopping tax-related fraud before refunds are issued, and updating IRS computer systems. Previous estimates have been upwards of
The levels of telephone service and in-person service are both taking a hit. To address the staffing shortfall, the leaders of the IRS's Accounts Management function said they will use overtime to reduce inventories. "More importantly to taxpayers, they will also reduce the telephone level of service goal to 70% compared to the 85% goal during the 2025 filing season," said the memo. "The last time the IRS achieved a level of service at 70% or lower was during the 2022 filing season when the level of service was 18% due to the surge of calls the IRS received after the pandemic. This level of service is equivalent to Accounts Management assistors answering fewer than one-in-five incoming calls to the IRS toll-free telephone lines. However, on Jan. 20, 2026, the Chief Executive Officer of Internal Revenue [Frank Bisignano] stated that the agency will replace how it measures telephone service with enterprise metrics that reflect new technologies and service channels."
The IRS has also shut down many of its in-person Taxpayer Assistance Centers. "The Field Assistance function generally assists taxpayers in-person at Taxpayer Assistance Centers (TAC) across the nation," said the report. "During the government shutdown in October 2025, all 362 TAC offices were closed. With the end of the shutdown in November 2025, the TAC offices have reopened. However, the operating status of the TACs can vary day-to-day due to illness, staff leaving, or staff taking other positions within the IRS. Reductions in the number of open TAC offices could potentially result in fewer taxpayers being served during the 2026 Filing Season. As of May 3, 2025, the IRS assisted nearly 1 million taxpayers in-person at a TAC office. Additionally, approximately 27 TAC offices were closed temporarily or were not staffed. As of December 2025, 35 TAC offices are closed."
TIGTA is also worried about the IRS's IT function in the wake of last fall's government shutdown, while another possible shutdown looms at the end of this week unless Congress can agree to pass appropriations bills.
"As of October 2025, the Information Technology function lost approximately 16% of its staff that are responsible for updates for inflation and expiring or new tax provisions," said the memo. "According to the IRS readiness reports, implementation of these legislative changes is at risk for the 2026 Filing Season. There were approximately 4,100 (58 percent) Information Technology employees reporting to duty during the shutdown out of approximately 7,100 employees on roll in October 2025. These employees primarily worked on testing the readiness of programs for the 2026 Filing Season. The Information Technology function also plays a role in the IRS's initiatives to offset staffing losses, e.g., Zero Paper Initiative, amended tax return automation, Taxpayer 360, etc. With the staffing losses, the IRS may be unable to update its tax return processing systems for the 2026 Filing Season. Additionally, the IRS has reported delays in the Zero Paper Initiative and Taxpayer 360."
AI reliance
Senate Democrats are also worried about the IRS's increased reliance on AI technology to make up for the staffing cuts. In their letter, they asked questions such as: "What specific enforcement tasks does Treasury believe AI can replace or materially augment in the absence of revenue agents? Identify which functions in large-partnership, large-corporation, and high-wealth examinations are expected to rely on AI, and separately, which still require trained personnel. What pilots, back-testing, or validation studies demonstrate that current or planned AI tools improve detection, adjustment rates, or revenue yield in complex, high-dollar cases compared with revenue-agent-led examinations?"
With staffing reduced and AI expanded, the lawmakers want to know what safeguards will prevent enforcement from shifting toward easier correspondence audits of lower-income taxpayers, and what operational capability thresholds of AI competence or performance are needed to provide IRS management with confidence that it can rely on AI and reduce enforcement staffing, particularly among revenue agents assigned to large-partnership and large-corporation examinations?
Similarly, TIGTA raised concerns about an IRS AI-powered initiative referred to as "Taxpayer 360."
"Finally, the IRS is developing Taxpayer 360, which will provide intuitive, artificial intelligence enabled tools, and user-friendly interfaces to enable more efficient issue resolution for taxpayers and the IRS," said the TIGTA memo. "Taxpayer 360 should make it faster and easier for employees to help taxpayers. However, Taxpayer 360 is facing delays due to the shutdown and resource prioritization and realignment. Users in the pilot program are reporting bugs, along with enhancements and other issues that require remediation before a larger scale release. One of the key initiatives for Fiscal Year 2026 is to have Taxpayer 360 available to 5,000 or more Accounts Management assistors by September 2026, which will be after the 2026 Filing Season."
