The IRS is ramping up tax enforcement in 2025, leveraging artificial intelligence (AI) to track unpaid taxes and increase audits. This shift means higher penalties and more aggressive collection tactics, making it crucial for individuals with tax debts or unfiled returns to seek professional help before these collection efforts advance in development.
IRS Tax Enforcement is Expanding in 2025 With The Help of AI
The Internal Revenue Service (IRS) plans to increase its efforts to collect unpaid taxes in 2025, utilizing artificial intelligence (AI) and additional funding to enhance enforcement capabilities. Individuals with outstanding tax debts, unfiled returns, or an incomplete understanding of new reporting requirements could face a heightened risk of audits, wage garnishments, and tax liens. With the IRS prioritizing collections on high-penalty debts, taxpayers must take proactive measures to protect their financial security.
AI-Powered IRS Enforcement and Expanded Oversight
Using Inflation Reduction Act (IRA) funding, the IRS has already made strides in enforcement, recovering $520 million from high-income individuals and partnerships who failed to file or pay recognized tax debts. Additionally, the IRS has opened audits of 76 of the largest partnerships in the U.S., including hedge funds, real estate investment partnerships, publicly traded partnerships, and large law firms. These audits showcase the agency’s use of AI and advanced analytics to select complex cases for examination.
While current IRS collection efforts are primarily focused on high-income individuals and complex partnerships, its AI-driven oversight is expanding.
One of the IRS’s Tax Exempt & Government Entities (TE/GE) priorities for FY 2025 is to:
“Continue to work with RAAS to develop and implement an Artificial Intelligence capability to assist with review and prioritization of referrals received on Exempt Organizations.“
This initiative underscores the IRS’s broader commitment to using AI to enhance oversight of tax-exempt organizations, ensuring that nonprofits and similar entities comply with tax laws and are not being used for fraudulent activities. The collaboration with the Research, Applied Analytics & Statistics (RAAS) division will enable AI to screen and prioritize referrals more effectively, increasing efficiency in investigations and compliance efforts. With increased funding and advancements in AI-driven tax enforcement, the IRS may develop more efficient methods to identify and pursue unpaid taxes across all income levels.
IRS AI Initiatives by the Numbers
As of February 2, 2024, the Treasury Inspector General for Tax Administration (TIGTA) reported 68 AI-related projects aimed at modernizing its operations. These projects are segmented into three focus areas:
Customer Service: 12 projects designed to improve taxpayer interactions.
Enforcement: 27 projects focused on enhancing tax compliance and collection efforts.
Overall Operations: 29 projects aimed at streamlining internal processes and improving efficiency.
This demonstrates the agency’s significant commitment to integrating AI across its operations to bolster compliance and service.
Addressing Challenges in AI Governance
Despite significant progress, the IRS has faced challenges in accurately tracking and managing its AI projects. Evolving definitions of AI and inconsistent reporting have contributed to these difficulties. To address this, the IRS has established a dedicated governance structure under its Chief Data and Analytics Officer to oversee AI initiatives and ensure alignment with agency goals.
Uncertain Future for Everyday Taxpayers
Although the IRS has yet to confirm whether AI-driven enforcement will target everyday taxpayers, it is clear that artificial intelligence is playing an increasingly significant role in tax compliance efforts. As AI capabilities expand and become more advanced, individual taxpayers may find themselves subject to heightened monitoring in the near future.
Protect Yourself Before It’s Too Late
With IRS enforcement poised to transform in 2025, taxpayers must be vigilant. Taking early action can help individuals secure a more favorable outcome and avoid costly penalties.
For more information or to schedule a free consultation call (888) 789-5011 or visit J. David Tax Law.
Your Tax Relief Questions, Answered
The IRS leverages AI to:
Analyze tax returns for inconsistencies or underreported income.
Identify high-risk taxpayers, including high-income individuals, large partnerships, and businesses.
Prioritize audit cases based on complex financial patterns.
Detect fraudulent activity by cross-referencing financial data and transactions.
In 2025, AI-driven audits are expected to increase, with a focus on high-penalty tax debts and large financial entities. However, as AI capabilities expand, everyday taxpayers could potentially also face heightened scrutiny in the upcoming years.
AI algorithms analyze tax filings, bank transactions, and other financial data to detect patterns that may indicate fraud or discrepancies. AI can prioritize complex cases, ensuring enforcement efforts focus on high-risk taxpayers.
J. David Tax Law specializes in tax resolution services, helping individuals and businesses navigate IRS audits, settle tax debts, and prevent wage garnishments or liens. Taxpayers can schedule a free consultation by calling (888) 342-9436 or visiting J. David Tax Law.
The IRS is rapidly expanding its AI capabilities, with continuous developments in machine learning and data analytics expected in the coming years. Enforcement efforts will likely become more aggressive and precise over time.
While the IRS is currently prioritizing AI-driven enforcement on high-income individuals and large partnerships, its expanded oversight could eventually impact small business owners and freelancers. AI is being used to detect underreported income, financial discrepancies, and tax filing inconsistencies, meaning self-employed individuals with complex finances may face increased scrutiny. As AI capabilities evolve, the risk of audits and enforcement actions for everyday taxpayers could grow in the coming years.
