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The Internal Revenue Service (IRS) has historically audited less than one percent of all tax filers, including just 0.3 percent in tax year 2021. However, numerous changes within the organization such as staff layoff and funding cuts could impact audit numbers moving forward. In an effort to improve efficiency, the IRS has begun integrating artificial intelligence (AI) into their systems for identifying non-compliance and fraud, although there is concern about the strategic use of the technology and whether there are sufficient experienced agents to handle AI-flagged cases.
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An in-depth analysis of the Internal Revenue Service (IRS) audit data reveals that only a miniscule percentage of taxpayers have faced audits in recent years. The IRS reportedly audited a mere 0.3 percent of filers in 2021, with less than one percent of all tax filers undergoing an audit. The audit rate is marginally higher among specific groups, such as those with certain types of income or tax breaks, but even these groups seldom experience audit rates of over ten percent.
Nonetheless, the state of affairs within the IRS itself might affect these figures. In the past year, a significant chunk of IRS staff members, including experienced enforcement and complex audit specialists, have either been laid off or have resigned. According to a July 2025 report by the Treasury Inspector General for Tax Administration, over a quarter of tax examiners and revenue agents left the agency. On top of that, the majority of the enforcement funding allocated via the 2022 Inflation Reduction Act has been withdrawn, and the current U.S. President is planning to further slash IRS funding in the coming year.
Meanwhile, the IRS is undergoing modernization, with increased focus on employing artificial intelligence (AI) in enforcement. IRS CEO Frank Bisignano informed the Senate Finance Committee this month that the IRS is using AI and advanced analytics to more accurately identify potential non-compliance and fraud risks. His goals include strengthening compliance and boosting collections beyond historical levels.
Whether these changes will have a significant impact on the likelihood of audits remains to be seen. Danny Werfel, a former IRS Commissioner, raised questions about the strategic and responsible use of technology. Concerns also exist about the capacity of the remaining experienced IRS employees to effectively select and audit returns identified by the AI. The hope is that AI could aid in minimizing ‘no change’ audits – audits that find no discrepancies and generate no additional revenue – by better identifying tax compliant individuals. Barry Johnson, the former chief data and analytics officer at the IRS, believes that AI will increase the agency’s efficiency in identifying noncompliance.
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