The IRS is stirring up serious controversy after it kicked off a wave of mass layoffs earlier this year, and now it’s planning to replace humans with artificial intelligence.
It started in February when 7,000 employees were let go, many of them crucial workers responsible for keeping tax filings accurate and law-abiding. Just one day after Tax Day, on April 15, a memo dropped another bomb: the agency plans to cut nearly 40% of its workforce.
That’s not a typo. From around 100,000 employees, the IRS is looking to shrink down to as few as 60,000, slashing through departments that handle taxpayer services and compliance. The first phase already began last month. The second kicks off in August.
It’s not just the size of the cuts, it’s what the agency plans to do next that’s setting off alarm bells. During a May 6 House Appropriations Committee hearing, U.S. Treasury Secretary Scott Bessent tried to calm the panic, saying the IRS will keep up its collections by leaning into artificial intelligence. According to Bessent, AI and “smarter IT” will not only fill the gap left by thousands of laid-off workers but will also boost tax collection.
That may sound like a sci-fi dream, or a bureaucratic nightmare, depending on who you ask. Bessent admitted that hiring fresh agents wouldn’t solve the issue either. Becoming a seasoned IRS collections expert takes years, he explained. Swapping in rookies wouldn’t help, and retraining people would take too long. His words? “It would be like sending in a junior high school student to try to do a college-level class.”
That’s a harsh but honest take, and it shows how confident the government is in AI stepping up to take over roles once held by experienced professionals. But it’s also terrifying. Can a system run by algorithms truly understand the nuances of tax laws or the human circumstances behind every late return?
What makes this even more dramatic is that the layoffs are already having an impact. According to a Treasury Inspector General report, the IRS lost 11% of its total workforce just in March. And when it comes to audits? About 31% of revenue agents, the very people responsible for digging into shady filings, are already gone, either laid off or offered a buyout.
This mass downsizing fits right into the current government strategy. Under President Donald Trump and Elon Musk, who now runs the Department of Government Efficiency (yes, it’s called DOGE), there’s a big push to “eliminate unnecessary programs” and cut down what they see as government bloat.
But while the IRS grabs headlines for leaning into AI, it’s not the only one. Big tech companies are also racing to automate. Amazon, Microsoft, and Google have all massively increased their AI investments this year. IBM CEO Arvind Krishna recently told The Wall Street Journal that his company’s use of AI led to the replacement of hundreds of HR roles. Still, overall headcount at IBM grew, thanks to re-investment in other areas.
Not everyone’s thrilled about that trend. A new YouGov survey shows more than one-third of U.S. workers are already worried about AI killing their jobs or cutting their hours. Over half believe AI will shrink job opportunities overall, and 55% fear their work hours will go down because of it.
The IRS story is just a snapshot of what’s happening on a larger scale. As more agencies and corporations gamble on automation, the human workforce is left wondering where they fit in. And when the agency that manages your taxes says it’s cutting the people who help you, and replacing them with tech, that’s not just a policy shift. That’s a warning sign.
The August wave of layoffs is just around the corner. What happens next could be a defining moment for how AI is used in government, and whether it actually works when people’s finances are on the line.
