IRS Audit Rates Remain Low Amid AI Adoption and Staffing Changes

For tax year 2021, the agency audited 0.3% of filers overall. Audit rates are higher for certain groups based on income levels or specific tax claims, but typically affect less than 10% of any group and often less than 1%. Significant changes have occurred at the IRS in the past year, including layoffs and resignations of a large percentage of employees, particularly in enforcement and complex audits.

Over a quarter of tax examiners and revenue agents left, as detailed in a July 2025 report from the Treasury Inspector General for Tax Administration. Funding for enforcement from the 2022 Inflation Reduction Act was largely rescinded, and the current administration seeks further cuts to IRS funding next year.

The IRS is modernizing its systems and expanding the use of artificial intelligence (AI) in areas including enforcement. “The IRS is using artificial intelligence (AI) and advanced analytics to identify high-risk areas of non-compliance and fraud with greater accuracy,” an IRS official stated in written testimony before the Senate Finance Committee earlier this month.

AI aims to improve the targeting of audits, reducing instances where audits find no issues. It can identify patterns and anomalies in tax returns more efficiently than previous methods. “AI gives us a forensic edge to select the right returns for audit,” former IRS Commissioner Danny Werfel said.

These are the most common type of audit, compared to more intensive field or office audits. However, sufficient trained staff is needed to handle inquiries from affected filers. Staffing shortages may limit the effectiveness of AI in conducting complex audits.

“I don’t think AI is going to substitute for the staff who have been lost. You still need people who are experts to conduct an audit by meeting with taxpayers and reviewing their books and records to determine if their tax return is accurate,” said Barry Johnson, former chief data and analytics officer at the IRS and now a nonresident fellow at the Urban-Brookings Tax Policy Center.

The rapid development of AI makes future capabilities hard to predict. The IRS has at least three years to audit a return after filing, with longer periods in cases of suspected fraud. The combination of AI adoption and staffing changes leaves the overall impact on audit rates unclear, depending on responsible use and adequate personnel.