IRS pauses AI modernisation and master file migration
Updated
Updated · The Atlantic · May 7
IRS pauses AI modernisation and master file migration
12 articles · Updated · The Atlantic · May 7
After the 2024 election, the agency cycled through four acting commissioners in three months and told the Government Accountability Office in March 2025 it was reevaluating priorities.
The halt affects efforts to use AI in code conversion, documentation and customer service, including work on the decades-old Individual Master File and planned migration of the Business Master File.
Before the pause, officials said AI had helped modernise taxpayer support and brought the Individual Master File about 90% into modern code by November 2024.
After the IRS’s AI modernization was paused, can any public tech project truly survive the political winds of change?
AI promises to 'fix' government bureaucracy, but at what cost to the human workforce that runs it?
IRS Modernization Stalled: $80 Billion Funding Cut and 27,600 Workforce Losses Threaten Tax Gap Closure
Overview
In March 2025, the IRS announced a strategic pause on parts of its $80 billion modernization plan to reassess how to integrate AI while managing its aging core systems like the Individual and Business Master Files. This pause came amid severe funding cuts and workforce reductions, including the termination of over 27,000 employees, which weakened enforcement and forced continued reliance on fragile legacy technology. The resulting delays, worsened by a federal shutdown, have caused backlogs in taxpayer services and identity theft case resolutions. While the IRS is piloting AI tools for fraud detection and shifting to a new framework of initiatives, it faces a difficult balance between maintaining essential operations and pursuing modernization under tight constraints.