The IRS’s long-running modernization push is still falling short for taxpayers, with widespread complaints about unhelpful artificial intelligence (AI) tools, underperforming online services, and slow progress, National Taxpayer Advocate (NTA) Erin Collins told Congress Wednesday in her annual report.
Technology modernization and IT issues were among the 10 most serious problems facing the IRS going into 2026, according to the NTA’s report.
While the tax agency has been working on its modernization efforts for years now – in 2024, the IRS had 23 active IT modernization efforts, which were paused in early 2025 to reevaluate priorities – efforts to positively impact taxpayers’ experiences have fallen short.
Even as the IRS rolls out new features for taxpayers’ online accounts, problems have persisted. For example, IRS surveys show that 80% of taxpayers found the IRS chatbots to be unhelpful.
Other online IRS tool gaps include a lack of a features for the Tax Pro Account, such as viewing IRS notices and accessing W-2s and 1099s. Additionally, the report notes that outdated systems can’t reliably handle international addresses – blocking taxpayers abroad from tools like “Where’s My Amended Return?” and automated disaster relief.
“Providing taxpayers with modernized services is only effective if the technological advances result in a better experience for taxpayers,” the report said.
Making those digital advances and improvements has been repeatedly slowed by federal procurement hurdles, the NTA noted.
The report said that dense regulations, such as the Federal Acquisition Regulation (FAR), can stretch IT contracts from solicitation to award for years – leaving tools outdated on arrival – while bid protests can freeze projects for up to 100 days.
To meet digital processing mandates set by the White House and speed procurement, the agency has turned to noncompetitive “bridge” contracts. But those have triggered legal challenges from vendors who have argued for competitive bidding processes and added more instability to procurement, the NTA explained.
“It is reasonable to conclude that such workarounds should not be necessary. Instead, the procurement system should be simple enough to acquire critical technology fast enough to respond to taxpayers’ need,” the report said.
Those procurement hurdles – and thus a reliance on paper-based processes, which NTA called the IRS’s “kryptonite” – also impacts taxpayers.
“Every additional form that a contractor fails to scan on time and every extra month spent ironing out contract details directly translate into longer wait times for taxpayers. When procurement falters, the domino effect is felt by taxpayers who experience stalled resolutions,” the NTA said.
While there have been recent ramped-up efforts to modernize and overhaul aspects of the FAR, the NTA said that “regulatory change alone will not quickly resolve operational failures that taxpayers experience most acutely through delayed refunds.”
The NTA also pointed to workforce shortages at the IRS as a modernization challenge.
“To fulfill its mission, the IRS must align hiring decisions with operational needs and emerging challenges, rather than target a predetermined staffing level,” NTA said. As part of the Trump administration’s directives to dramatically cut the federal workforce, the IRS went from over 100,000 employees to just under 75,000 during 2025, the report showed.
Specifically, the IRS IT department lost 31% of its staff, and it dissolved its Transformation and Strategy Office, which was a specialized unit established in part to oversee modernization and technology improvements.
Between staff cuts and changes to tax filing processes under the One Big Beautiful Bill, the NTA said that the risk is high “that the 2026 filing season will be more difficult, frustrating, and costly for taxpayers, practitioners, and the IRS.”
Diana Tengesdal, deputy inspector general for audit, sent a letter to the IRS commissioner on Monday that said due to “staffing losses, the IRS may be unable to update its tax return processing systems for the 2026 Filing Season.” She added that “new efforts to modernize tax administration are delayed and their expected efficiencies may not occur during the upcoming filing season.”