“As part of its audit selection process, I.R.S. uses statistical models to help review partnership returns for potential noncompliance, but the models were developed without using representative samples of returns and with untested assumptions,” the G.A.O. said.
The I.R.S. has also lacked the ability to compare the tax information of large partnerships to other partnerships to look for additional warning signs, but artificial intelligence is starting to make that possible and is expected to improve over time.
As part of its recruiting strategy, the I.R.S. has been looking to hire data scientists to develop new in-house artificial intelligence tools. Mr. Werfel said that the agency is also collaborating with outside experts and contractors on the project.
Last month, the I.R.S. said it had increased its full-time staff to nearly 90,000, a level not seen in more than a decade.
Mr. Werfel warned that additional cuts to its annual budgets would require him to redirect money meant for upgrading the agency so that it can carry out basic tasks, and that ultimately taxpayers would bear the brunt of it.
“My big responsibility here is to make the case to Congress and to the American people that if you fund our base budget, it will enable us to both keep the lights on and modernize — and modernizing the I.R.S. is good for everybody,” he said.