GAO urges Treasury to address IRS transformation, enforcement, and taxpayer service failures

GAO-26-108992 IRS Priority Recommendations

The GAO found 27 important recommendations that the IRS has not yet addressed. These issues affect how the IRS updates its systems, enforces tax laws, closes the tax gap, and serves taxpayers.

GAO’s Action

The Government Accountability Office asked Treasury Secretary Scott Bessent to focus immediately on three main IRS reform areas: managing the agency’s changes, reducing the tax gap, and improving the taxpayer experience.

GAO made recommendations, not rules. The letter does not change tax laws, taxpayer duties, audit procedures, or how the IRS enforces rules.

Why It Matters

• This is a consequential oversight warning, not routine administrative correspondence. GAO identified weaknesses that affect the IRS’s core enforcement, modernization, and taxpayer-service functions.

• IRS modernization has lost both funding and centralized leadership. Congress rescinded or restricted more than half of the approximately $79.4 billion originally appropriated under the Inflation Reduction Act. The IRS also disbanded the office that had led its transformation program.

• Enforcement capacity remains a central concern. GAO specifically highlighted shortages of employees qualified to examine high-income and high-wealth taxpayers, whose returns often involve complex entities, transactions, and valuation issues.

• Service improvements lack adequate performance measurement. GAO concluded that the IRS needs clearer goals, measures, and targets to determine whether taxpayer-service projects actually improve taxpayer outcomes.

• The letter signals likely congressional scrutiny. GAO expressly noted that Congress may use hearings, appropriations, legislation, and funding restrictions to press agencies to implement priority recommendations.

Key Facts

• GAO issued the letter on June 24, 2026.

• The letter was addressed to Treasury Secretary Scott Bessent.

• The IRS had 238 open GAO recommendations as of June 2026.

• GAO classified 27 recommendations as priorities, meaning implementation could materially improve government operations, reduce waste or abuse, generate significant savings, or address a high-risk area.

• The IRS had implemented only one of the priority recommendations identified in GAO’s September 2025 letter.

• The IRS’s implementation rate for recommendations made five years earlier was 72 percent, compared with a government-wide rate of 77 percent.

• Congress originally provided approximately $79.4 billion to the IRS under the Inflation Reduction Act of 2022.

• Subsequent legislation rescinded or restricted the use of more than half of that funding.

Priority Area One: Managing IRS Transformation

The IRS began a broad transformation program covering technology, organizational structure, taxpayer services, enforcement, and resource allocation. Its 2023 Strategic Operating Plan relied heavily on the multiyear funding provided by the Inflation Reduction Act.

That plan now operates under materially different conditions.

Congress reduced the available funding through later legislation. The administration’s fiscal year 2027 budget proposal recommended additional reductions. IRS officials also reported in March 2025 that the office responsible for leading the transformation had been disbanded.

GAO said the IRS was still determining which projects would continue and who would lead them.

GAO recommended that the IRS apply established organizational-reform practices, including:

• Setting clear and measurable transformation goals.

• Establishing an effective implementation process.

• Assigning responsibility for specific initiatives.

• Engaging Congress and other affected stakeholders.

• Allocating sufficient personnel and funding to the projects the agency decides to retain.

The issue is bigger than just saving certain technology projects. The IRS needs to figure out how to use its smaller budget to support enforcement, taxpayer service, cybersecurity, staffing, and old systems in a clear overall plan.

Priority Area Two: Addressing the Tax Gap

The tax gap is the difference between the amount of federal tax legally owed and the amount paid voluntarily and on time.

GAO described reducing that gap as a pressing IRS challenge. It also noted that tax-law enforcement has remained on GAO’s High-Risk List since 1990 because of its vulnerability to revenue loss, noncompliance, mismanagement, and operational weakness.

Audits are still a key part of how the IRS checks compliance. GAO found that insufficient staffing makes it hard for the IRS to handle complex audits, especially for high-income and wealthy taxpayers.

Those examinations often require specialized knowledge involving:

• Partnerships and pass-through entities.

• Closely held businesses.

• International transactions.

• Trusts and estates.

• Valuation issues.

• Related-party transactions.

• Complex ownership structures.

GAO previously reported that the IRS had lost a significant number of employees capable of handling these cases. That problem existed before the workforce reductions that occurred in 2025.

GAO recommended that the IRS:

• Develop and implement a strategy to recruit personnel qualified to examine complex returns.

• Train employees to handle high-income and high-wealth examinations.

• Evaluate the effectiveness of the models used to select returns for audit.

Choosing which returns to audit is important because the IRS has limited resources. Poor selection methods can waste skilled staff on less important cases and miss returns that are more likely to have problems.

GAO said that following these recommendations could strengthen enforcement, increase federal revenue, and ease the burden on taxpayers who already follow the rules.

The letter does not mean that any specific taxpayer is more likely to be audited. Instead, it points out problems in how the IRS chooses and reviews complex returns.

Priority Area Three: Improving the Taxpayer Experience

GAO also identified persistent weaknesses in IRS taxpayer service.

The IRS had planned numerous service projects using Inflation Reduction Act funding. Those projects were intended to improve taxpayer interactions with the agency, including access to assistance and the resolution of tax-account problems.

In April 2025, however, IRS officials told GAO that the office overseeing those efforts had been disbanded. The IRS was reassessing the projects because of funding and staffing constraints.

GAO identified several continuing problems:

• Limited evidence showing whether service initiatives improve taxpayer outcomes.

• Inadequate performance measures.

• Uncertain funding.

• Staffing limitations.

• Frequent changes in tax law.

GAO recommended that the IRS establish an evidence-based system for evaluating taxpayer-service improvements. That system should connect each initiative to defined performance goals, measurable targets, and reliable data.

The goal is not just to track activity. Numbers like calls answered or accounts created do not always show that taxpayers got correct answers or had their issues resolved.

A better way to measure results would help the IRS decide which service projects deserve more funding, which ones need changes, and which ones should end.

Additional Operational Concerns

GAO linked the priority recommendations to several broader government-management risks.

Cybersecurity is very important because the IRS holds a lot of sensitive taxpayer and financial information. Decisions about updating systems affect both how the IRS serves people and how it protects data.

GAO also cited fragmentation and duplication within IRS operations. It specifically noted that IRS business units could improve coordination when using artificial intelligence.

The problem is not just that different IRS units might buy the same technology. If AI development is not coordinated, it can lead to mixed-up controls, extra costs, systems that do not work together, or conflicting uses of taxpayer data.

Significance for Tax Professionals

The letter does not change filing, reporting, or procedures right now. Its main value is in showing what the IRS can and cannot do.

Tax professionals should distinguish between three separate effects.

First, reduced funding and changes at the IRS may slow updates and service projects. Tax professionals might still see uneven service, slow problem-solving, and trouble reaching IRS staff.

Second, GAO still sees enforcement for high-income and wealthy taxpayers as a top priority. Even though staffing is lower, the main goal is to address complex cases of noncompliance.

Third, new IRS projects may need to show clear results. Congress and GAO will probably judge programs by what they actually achieve, not just by plans or spending.

Limits of the Letter

GAO does not direct IRS operations and cannot compel implementation of its recommendations.

The letter also does not:

• Announce a new IRS enforcement campaign.

• Change audit-selection criteria.

• Suspend any modernization project.

• Restore or rescind IRS funding.

• Establish taxpayer-service standards.

• Impose deadlines on Treasury or the IRS.

The letter’s real impact comes from Congress watching over the IRS. GAO said Congress might turn recommendations into laws, check on progress in hearings, or use funding to push for changes.

The Takeaway

The letter shows that the IRS is trying to update and enforce the tax system despite having less money, leadership changes, fewer staff, and weak ways to measure progress. There are no new rules for tax professionals right now, but the problems GAO described will keep affecting audits, case handling, and taxpayer service.