Former IRS Commissioner: Here’s how we used AI to create immediate value when taxpayers scrutinized every dollar

Fortune

by Danny Werfel

February 22, 2026

AI-Generated Deep Dive Summary

The Internal Revenue Service (IRS) has demonstrated how government agencies can effectively leverage AI to deliver measurable results, offering valuable insights for businesses looking to achieve similar success. In 2023, the IRS began integrating AI into its operations to enhance taxpayer service, compliance, and efficiency. Unlike private sector companies that often struggle to see tangible returns on their AI investments, the IRS achieved significant progress by focusing on immediate value creation and accountability. By identifying critical pain points and applying AI solutions strategically, the agency reduced operational inefficiencies and improved outcomes. The IRS followed a three-pronged approach to maximize AI's impact: General Purpose AI for daily productivity, Domain-Specific Systems for precision in sensitive areas like tax analysis, and Custom AI for solving unique problems. For instance, deploying domain-specific AI to handle taxpayer hotline inquiries cut response times from 28 minutes to just three, resolving millions of calls within the first year. Similarly, custom AI systems analyzed millions of transactions to identify high-risk cases, preventing billions in fraud and improper payments. The key takeaway for businesses is that successful AI implementation requires a strategic approach, starting with general tools before moving to more specialized solutions. Jumping straight into custom AI can be costly and challenging, making it harder to demonstrate ROI. By following the IRS's example—prioritizing measurable impact and investing in tailored AI systems—organizations can unlock greater efficiency, compliance, and profitability. This approach is particularly relevant for businesses facing pressure to show results from their AI initiatives. The IRS's success highlights the importance of aligning AI tools with specific business needs and workflows, ensuring that investments yield tangible benefits. For industries dealing with sensitive data or complex operations, domain-specific and custom AI solutions offer a competitive edge by delivering faster ROI and improving accuracy. Ultimately

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Originally published on Fortune on 2/22/2026