On President Trump’s 100th day in office, the Treasury Department released a statement of the administration’s achievements, including one for the IRS: This is the most transparent Administration in history, and the American people are witnessing a transformative transition for this crucial agency.

In one sense, Treasury’s assessment is correct: Rollbacks in the IRS’s funding and staffing suggest that we are observing a transformative transition for the IRS. 

But it’s so far unclear how the Trump Administration plans to achieve one of its stated goals: IRS modernization.

What we know so far

The Administration’s public statements provide some clues as to its plans for modernizing the IRS. 

The OMB’s skinny budget submission for FY 2026, released May 2, simply asserts that “technology improvements would increase IRS efficiency.” 

In testimony before the House Appropriations Committee, Treasury Secretary Scott Bessent noted efforts to reduce paper processing through policy changes and automation. In response to question about the Administration’s proposal to cut the IRS budget by $2.4 billion, Bessent also said that the IRS plans to enhance collections with artificial intelligence (AI).

More on the Administration’s possible strategy came from the March “hackathon” organized by the Department of Government Efficiency (DOGE). The goal was to create a mega API—application programming interface—which would enable the IRS’s multiple software applications to better communicate and exchange information. 

These are all laudable aspirations—but left unanswered are critical questions such as:

• How will reduced paper processing, enhanced use of AI, and a mega API fit together to modernize the IRS?
• Which taxpayers would be the target of any expanded use of AI?
• Would the mega API be focused on improving taxpayer services and enforcement, or would its purpose be enabling the IRS to exchange more information with other agencies for reasons other than tax administration?

This shortfall in transparency is not unique to the Trump Administration. At this point in President Biden’s term, the Treasury Department released an agenda for compliance that was also mostly aspirational. The details of the Biden’s plan only began to emerge months after IRA’s passage (though, for some observers, the IRS’s strategic plan was still too vague). 

Can any administration modernize the IRS with less staff and less funding?

Treasury’s 2021 agenda included two key ingredients for modernization: more staff and more funding. With these two ingredients, reductions in paper processing and greater use of AI were advancing rapidly in the Biden administration. 

In contrast, Secretary Bessent argues that investments in AI will be more cost-effective than hiring more agents. 

But as TPC’s Barry Johnson and I wrote after the first round of layoffs and buyouts: Technology is not a replacement for people. Both computer scientists and tax experts must work together to develop, monitor, and evaluate new technology. AI-driven improvements in detection mean little without skilled auditors and collection officers to follow up with taxpayers. And taxpayers’ rights must be protected by staff in appeals and the taxpayer advocate offices. 

Since we wrote those blogs, the IRS’s staffing levels have only gotten worse, with another 20 percent of the workforce applying for buyouts in April. 

The “skinny” budget submission for FY 2026 raises more questions about the Trump administration’s fiscal commitment to modernization.

The budget plan would reduce the IRS appropriations by $2.4 billion (20 percent)—with $2 billion coming from “eliminating, renegotiating, and descoping wasteful IT and professional services contracts.” 

But the budget dollars for modernization don’t add up—the purported savings equal the total amount allocated for IT in recent budgets (see Table 2.3 of the IRS’s Congressional Budget Justification). Those dollars are primarily for maintaining the current systems and upgrades to cybersecurity—needed funds for keeping the IRS in business until the IRS’s technology is brought into the 21st century. 

Funding specifically earmarked for modernization, on the other hand, is nearly exhausted. Congress zeroed out additional appropriations for modernization after the 2022 Inflation Reduction Act (IRA’s) passage, and the $4.8 billion set aside for modernization in IRA is expected to run out by next year. 

There is another potential pool of funding—the roughly $20 billion for operations support that was left over after three rounds of rescissions from IRA-mandated funds. The $20 billion has so far survived in the current budget bill, but some Republicans on the tax-writing and appropriations committees are reportedly discussing clawing it back. 

Modernization efforts will require transparency in both detail and support

Modernization has been an ongoing concern for IRS and policymakers, reflecting a decades-long history of expensive, incomplete modernization efforts. 

But without more transparency, it’s difficult to determine if the Trump administration has found a more cost-effective way to modernize the IRS. Ultimately, taxpayers will feel the impact of modernization or continue to suffer from the lack of it.