An Internal Revenue Service advisory panel on Wednesday released a report recommending 18 reforms aimed at modernizing the U.S. tax system, including broader use of artificial intelligence, stronger fraud prevention and expanded digital taxpayer services.
The Electronic Tax Administration Advisory Committee, or ETAAC, is a federal panel created to help guide the IRS on electronic tax administration and digital filing through annual recommendations to Congress.
The panel said the agency must adapt as tax fraud grows more sophisticated and taxpayer expectations continue to evolve.
"Together, we can continue to build a tax administration system that is modern, secure, and responsive to the needs of all taxpayers," Amy Miller, chair of the IRS Electronic Tax Administration Advisory Committee, said in the report.
Technology And AI Push
A major focus of the report was upgrading the IRS's aging technology systems, which officials said continue to slow processing and create inefficiencies.
ETAAC urged the IRS to expand artificial intelligence for fraud detection, identity verification and workflow automation. It also recommended creating a public dashboard showing where AI is used and how privacy, bias and security risks are managed.
The panel also warned about rising tax scams, including identity theft refund schemes, ghost tax preparers and fraudulent filings.
To curb fraud, ETAAC recommended faster access to tax documents such as W-2s, which report employee wages, and 1099s, which track non-employee income. That would allow the IRS to verify taxpayer information earlier and stop fraudulent refunds before payments are issued.
Other recommendations included faster data sharing with state tax agencies, better error and rejection codes in IRS filing systems, broader electronic filing for more tax forms, improved access for authorized tax professionals and less redundant paperwork.
Digital Shift Gains Momentum
The recommendations come as the IRS continues its broader digital push.
Earlier this year, the IRS expanded access to its Business Tax Account platform, allowing millions of additional businesses and organizations to view records, make payments and receive notices online instead of relying on paper and phone interactions.
The broader federal government has also been moving toward digital administration. The Social Security Administration recently said it plans to fully phase out paper benefit checks as agencies shift toward electronic payments to improve efficiency and security.
ETAAC also called for stronger oversight of paid tax preparers, simpler tax forms and better communication with taxpayers.
The committee warned that long-term modernization could stall without stable multi-year funding from Congress, saying budget uncertainty remains one of the biggest challenges facing the IRS.
The report is advisory and not legally binding, meaning Congress and the IRS will decide whether to implement the recommendations.
