The IRS uses artificial intelligence in three main places: choosing which tax returns to audit, answering routine taxpayer questions by phone and web chat, and converting paper returns into digital data. How the IRS uses AI matters most in enforcement, where machine-learning models now score returns for audit risk and focus attention on large partnerships and high-income filers with significant tax debts rather than typical wage earners.
How AI Decides Which Returns Get Audited
The biggest role AI plays at the IRS is selecting returns for examination. Instead of older statistical sampling, the agency uses machine-learning models that read across millions of filings and score each return based on the probability of non-compliance. The models look for patterns and anomalies that traditional methods missed.
Those models cross-reference what you report against third-party information the IRS already holds. That includes W-2s and 1099s, plus data on high-value asset purchases, cryptocurrency transactions reported by exchanges, and foreign bank account disclosures. When the numbers don’t line up, your return gets a higher risk score.
You will never be told whether a person or an algorithm flagged your return. The IRS treats its selection methods as confidential, and no law requires the agency to explain its reasoning.
Large Partnerships and High-Income Taxpayers
The IRS has aimed its AI enforcement at two groups it historically struggled to audit. The Large Partnership Compliance program runs machine learning against the full population of large partnership returns, including hedge funds, private equity firms, and real estate investment groups. For tax year 2021, the program flagged 82 high-risk partnership returns for examination, compared with near-zero audits of these entities in prior years.
On the individual side, a separate initiative targets taxpayers with total positive income above $1 million and recognized tax debt exceeding $250,000. That effort surpassed $1 billion in recovered back taxes as of late 2024.1U.S. Department of the Treasury. IRS Announce $1 Billion in Past-Due Tax Collections From High-Income Taxpayers The broader goal is narrowing the annual tax gap, which the IRS projects at $696 billion for tax year 2022.2Internal Revenue Service. The Tax Gap
If You Earn a Regular Paycheck
If you draw a typical salary and your W-2 income matches your return, AI-driven selection is not aimed at you. The IRS has said these tools focus on complex, high-dollar non-compliance rather than pushing more audits onto middle-income filers. Algorithms are not perfect, though. A flagged return doesn’t mean you did something wrong; it means something in your filing matched a pattern the model associates with risk.
AI in Phone and Web Service
The IRS also uses AI to handle the millions of routine interactions taxpayers have with the agency. The two most visible tools are voice bots on the phone system and chatbots on IRS.gov.
Voice Bots
The IRS began putting voice bots on its phone lines in early 2022. These AI-powered systems let callers use natural language instead of punching menu numbers. Voice bots handle questions about making payments, understanding collection notices, and setting up or modifying installment agreements. Eligible taxpayers can authenticate their identity and create short-term payment plans of up to 180 days, or long-term plans, without waiting for a human agent.3Internal Revenue Service. Using Voice and Chat Bots to Improve the Collection Taxpayer Experience
Chatbots on IRS.gov
The web chatbots answer general questions about collection topics. They run on pre-programmed business rules rather than generative AI, meaning they follow decision trees instead of composing original answers. That design avoids hallucinations, but it also limits what they can do: the bots cannot pull up your account information or answer nuanced questions about your specific tax situation.
The limits show in the numbers. As of late 2024, only about 29 percent of chatbot users resolved their issue without escalating to a live agent, a drop from the prior year. Nearly half of sessions ended with the user asking for a human.4Internal Revenue Service. New Voice Bot Options Mean Faster Service and Less Wait Time for Taxpayers
AI in Paper Return Processing
The IRS still receives millions of paper returns each year, and AI has sped up processing them. A pilot program used optical character recognition with AI to scan paper returns, extract the data, and validate it through automated business rules before routing it into the electronic system. During testing, the system processed nearly 140,000 returns and accepted 76 percent without any human intervention. The rest were sent for manual review, usually because of errors or illegibility.
Your Rights If Your Return Is Flagged
The Taxpayer Bill of Rights applies to every audit no matter how it started. Ten fundamental rights are codified in the tax code; the ones that matter most during an examination are the following.5Internal Revenue Service. Taxpayer Bill of Rights
- Right to be informed. During any in-person interview, the IRS employee must explain the audit process and your rights.
- Right to representation. You can hire an attorney, CPA, or enrolled agent, and the IRS cannot require you to attend personally unless it formally summons you. If you ask to consult a representative during an interview, the IRS must generally pause the conversation.
- Right to appeal. If you disagree with the proposed adjustment, you can request an administrative appeal through the independent IRS Office of Appeals before paying anything. You can also petition the U.S. Tax Court.
- Right to finality. You are generally subject to only one audit per tax year. The IRS can reopen a previously examined year only in limited circumstances, such as evidence of fraud.
- Right to privacy. The IRS should not dig into your personal lifestyle during an audit unless there is a reasonable indication of unreported income.
If you cannot afford professional representation, the Taxpayer Advocate Service and Low Income Taxpayer Clinics can help. Paid representation varies. CPAs typically charge between $150 and $400 per hour for audit work, and tax attorneys often charge $450 or more per hour depending on the case and location.6Taxpayer Advocate Service. Taxpayer Rights
How Your Data Is Protected Inside These Systems
Every piece of tax information that runs through IRS AI systems is covered by Section 6103 of the Internal Revenue Code, which makes your returns and return information confidential by default. No IRS employee, contractor, or state official with access to that data may disclose it except under narrow exceptions laid out in the statute, such as disclosures to the Department of Justice for tax enforcement or to state tax agencies for administration. Unauthorized disclosure is a federal crime, and taxpayers whose information is improperly revealed can sue for civil damages.7Office of the Law Revision Counsel. 26 U.S. Code 6103 – Confidentiality and Disclosure of Returns and Return Information
Private vendors that build or host AI models for the IRS have to meet extensive cybersecurity requirements. Under rules aligned with the Federal Information Security Modernization Act and NIST standards, contractors must encrypt data at rest and in transit, use phishing-resistant multifactor authentication, maintain automated audit logs, and enforce least-privilege access so no single person can authorize a transaction start to finish. All cryptographic systems must meet Federal Information Processing Standards.8Internal Revenue Service. Cybersecurity Requirements Contract Language
AI-Powered Scams That Pretend to Be the IRS
Criminals are adopting AI too. The IRS included AI-enabled impersonation in its 2026 Dirty Dozen list of the most dangerous tax scams. Fraudsters use voice-cloning technology and spoofed caller IDs to make phone calls that sound like they are coming from IRS agents, often with convincing American accents and official-sounding scripts. The goal is to create panic, demand immediate payment, and stop you from verifying anything.9Internal Revenue Service. Dirty Dozen Tax Scams for 2026
The most reliable way to tell a real IRS contact from a scam is the method of first contact. The IRS initiates communication by mail. A letter or notice is always the first step, whether for an audit, a balance due, or anything else. An IRS agent may call, but only after you have already received a letter, and typically only to confirm an appointment or discuss items for a scheduled examination.10Internal Revenue Service. Ways to Tell if the IRS Is Reaching Out or if It’s a Scammer
If someone calls claiming to be from the IRS and you have received no letter, hang up. The IRS will never demand immediate payment over the phone, threaten arrest, or leave urgent prerecorded voicemails. If you are unsure, call the IRS directly at the number on your most recent notice or on IRS.gov. The agency also warns against relying on outside AI-generated tools for complex tax questions, since generative systems can produce confident-sounding answers that are factually wrong.