In 2025, the Internal Revenue Service is expanding the use of AI in tax audits, raising urgent questions about transparency and taxpayer rights. Artificial intelligence tools now help identify anomalies, flag suspicious returns, and even recommend enforcement actions. This shift has sparked debate about due process protections in U.S. tax law and courts.
Key takeaways
The use of AI-driven audits can improve efficiency and recover lost revenue, but it also risks unfair targeting, errors, and reduced human oversight. Ensuring that taxpayers have a clear path to challenge automated findings is critical.
Legal basis
The IRS operates under the Internal Revenue Code and must comply with the Taxpayer Bill of Rights, which includes the right to challenge IRS decisions and be heard. Courts are beginning to assess whether algorithmic enforcement meets constitutional due process standards. For more information, see Taxpayer Advocate Service (TAS).
State-by-state differences
Although tax enforcement is primarily federal, states such as California and New York are experimenting with AI-based tax compliance tools. These programs highlight regional variations in oversight and taxpayer appeal processes.
Real-world cases
In 2024, several lawsuits were filed by taxpayers alleging that automated IRS audit notices contained errors and lacked adequate human review. Early court decisions emphasized the need for meaningful appeals and human judgment when algorithms generate enforcement actions.
Step-by-step actions
Taxpayers facing an AI-driven audit in 2025 should: 1. Request full disclosure of how the audit was initiated. 2. Preserve all records, correspondence, and supporting documents. 3. Seek assistance from the Taxpayer Advocate Service for appeals. 4. Consult legal counsel familiar with AI oversight in tax enforcement. 5. Monitor ongoing court rulings that shape due process protections.
Why this matters
AI is transforming the relationship between taxpayers and the IRS. Without strong due process protections, automated audits could erode trust and fairness in the tax system. Clear legal standards and accountability are essential to balance efficiency with constitutional rights.
FAQ
What is new about IRS use of AI in 2025?
The IRS is expanding AI systems to detect tax fraud, assess compliance risks, and prioritize audits, leading to more automated enforcement actions.
Do taxpayers have due process protections against AI audits?
Yes. The Taxpayer Bill of Rights guarantees the right to appeal and challenge IRS findings, though courts are still clarifying how these rights apply to algorithmic decisions.
How does this issue relate to taxes and court basics?
Because disputes over AI audits often end up in court, understanding due process protections has become part of taxes and court basics in 2025.