IRS panel backs AI, stable funding and simpler tax administration

The IRS’s outside technology advisory panel used its June 18 annual report to make a broader point than any one system upgrade: tax administration only gets simpler if funding is steady, data moves cleanly and AI is built into the workflow with real guardrails. For KPMG tax teams, that lands directly in compliance, controversy and planning, where the quality of IRS service determines how much time goes to advising clients and how much goes to chasing down notices, account issues and missing data.

The Electronic Tax Administration Advisory Committee said its 2026 agenda covered six priority areas: technology and data sharing, sustained IRS funding, AI and human-centered design, digital filing and payments, tax simplification and outreach, and fraud prevention and preparer regulation. Its recommendations pressed for secure APIs, real-time data sharing and modernized taxpayer and practitioner account platforms, while also urging the IRS to expand AI with transparency and governance and put taxpayers and tax professionals at the center of system design. For KPMG, that points to a stronger market for work on digital process readiness, tax operations and system integration, especially as clients ask how to prepare for more digital exams and more automated IRS touchpoints.

The staffing picture makes the stakes sharper. In June 2025, the National Taxpayer Advocate said the IRS workforce had fallen by more than 25% to fewer than 76,000 from 102,000 employees at the start of the filing season, and warned that the administration’s budget proposal would cut appropriated IRS funding by 20%, or 37% when reduced Inflation Reduction Act supplemental funding is counted. The panel’s warning was clear: resource strain and complexity can erase modernization gains. For practitioners, that means more of the burden shifts outward. Faster notice handling, cleaner taxpayer account resolution and more precise documentation will not just be nice to have, they will be the difference between moving work forward and getting stuck in rework.

KPMG has been building for that same shift. The firm launched its Tax AI Accelerator Program on February 3 and said more than a dozen companies were taking part, including Duke Energy as one of the first Fortune 150 participants. The program uses a custom deployment of KPMG’s Digital Gateway platform built on Microsoft Azure OpenAI, and Rema Serafi has said more than half of tax departments are already using or exploring generative AI, while 86% of tax leaders see the tools as a way to address talent gaps. The ETAAC report strengthens the case that the next edge in tax will belong to teams that can combine technical judgment with AI-enabled delivery, not one or the other.