Why More Returns Are Being Flagged for Review in 2026—and What It Means for Your Refund

The IRS is undergoing the biggest technology shift in decades. Fueled by funding from the Inflation Reduction Act (IRA), the agency is aggressively expanding automation, artificial intelligence (AI), and machine-learning tools to spot errors and potential fraud earlier in the process. While the long-term goal is faster, more accurate tax administration, the short-term result is clear:

More returns than ever are being flagged for review, resulting in more refund delays.

If your transcript suddenly shows TC 570, or your refund seems frozen without warning, there’s a good chance your return was flagged by one of these new automated compliance systems.

This guide breaks down what the IRS AI systems are doing, why they’re causing delays, and how taxpayers can navigate this new era of automated tax enforcement.

The IRS’s New AI and Automation Initiatives

The IRS has invested heavily in:

• Machine-learning algorithms
• Automated compliance filters
• AI-enhanced identity verification
• Predictive fraud scoring
• Advanced data-matching systems
• Real-time wage and withholding checks

These systems allow the IRS to scan returns faster and flag suspicious or inconsistent information well before human review.

For taxpayers, this means:

• More automated screenings
• More returns flagged early
• Fewer refunds released without review
• Faster detection of mismatches and errors
• More refund holds triggered by TC 570

The AI systems now catch issues that older IRS systems could not.

Why Automated Systems Trigger More Refund Delays

The new AI-driven filters are designed to detect:

• Withholding inconsistencies
• Income mismatches
• Questionable refundable credits
• Dependent duplication
• Marketplace insurance conflicts (Form 1095-A)
• High-risk refund claims
• Suspicious filing patterns
• Identity-theft indicators

These triggers previously required human review, meaning only a fraction of returns were delayed.

Now, AI flags thousands more in seconds.

The result: More TC 570 holds than in prior years.

Understanding TC 570 in the AI Era

The code most taxpayers now see due to AI flagging is:

TC 570 – Additional Account Action Pending

This code freezes the refund until:

• Automated verification clears the issue
• A human reviewer conducts a manual check
• Missing information is confirmed or corrected
• Identity validation is completed

AI may place the hold immediately, but lifting it still often requires human intervention.

This can add 2–12 weeks to processing times depending on the type of review.

What Types of Returns Are Most Likely to Be Flagged?

AI systems focus heavily on patterns known to cause errors or fraud. Returns likely to be flagged include:

1. Refundable Credit Returns

Particularly those claiming:

• Earned Income Tax Credit (EITC)
• Additional Child Tax Credit (ACTC)
• American Opportunity Tax Credit (AOTC)
• Premium Tax Credit (PTC)

2. High Withholding Compared to Income

AI quickly detects unusual wage-to-withholding ratios.

3. Dependent Claims

Especially when a dependent is claimed on multiple returns.

4. W-2 and 1099 mismatches

The IRS now receives near-real-time data from employers and payers.

5. Identity-theft indicators

AI compares filing patterns to known fraud models.

6. Self-employed filers with Schedule C income

AI flags high deductions, inconsistent income, or missing 1099s.

7. Early filers

When IRS wage data has not fully loaded, mismatches occur more easily.

AI systems are designed to focus on risk, not randomness.

How AI Changes Refund Processing in 2026

AI dramatically shifts the refund timeline in several ways:

1. Faster Detection, Slower Release

AI stops more returns early in the process, but review departments are still human-staffed.

2. Increased Use of Automated Notices

Expect more:

• CP05
• CP75
• 5071C
• 5747C
• 2645C
• Dependent verification letters

3. More Returns Routed to Special Review Units

Including identity protection and wage verification teams.

4. Longer Queues for Human Review

Because AI flags more returns, the IRS must manually review a larger number of cases.

5. Greater Focus on Accuracy

The IRS is placing accuracy over speed, meaning refunds move only after all inconsistencies are cleared.

What Taxpayers Should Expect When AI Flags Their Return

If your return is flagged:

You will most likely see

• TC 570 (Refund Hold)
• TC 971 (Notice Code)
• A delay in transcript updates
• Possible requests for documents

Your refund will not move until

• Automated matching completes
• A human resolves the flagged issue
• A correction is made to the return

Your timeline may extend

• 3–6 weeks for simple automated matches
• 6–12 weeks for wage or credit verification
• 12–20 weeks for identity-theft or fraud-pattern reviews

AI detection is fast. Resolution is not.

What You Can Do to Prevent AI-Driven Delays

While you cannot prevent all reviews, you can reduce your risk by:

1. Double-checking your W-2 and 1099 entries

Match numbers exactly.

2. Ensuring dependent information is correct

Names, SSNs, and residency must match IRS records.

3. Filing after wage data loads

Avoid filing too early in January.

4. Avoiding estimated or rounded numbers

AI quickly spots inconsistencies.

5. Responding to any IRS notices immediately

Delays increase when documents are missing.

6. Monitoring your IRS transcript

Look for TC 570, 971, or other review indicators.

Automation rewards accuracy and consistency.

The Future: Faster Refunds, But Only After Verification Systems Mature

Long-term, IRS automation should lead to:

• Faster refunds
• Fewer errors
• More accurate returns
• Stronger identity-theft protection

But in the early stages of adoption (2025–2027), delays are likely to increase as AI flags more returns than the IRS has staff to manually review.

Taxpayers will benefit—but the transition will be bumpy.

The IRS’s new AI and automation systems are reshaping the refund timeline. While these tools catch more errors and fraud than ever before, they also create more TC 570 refund holds, more compliance reviews, and more early-season delays.

If you see a refund freeze this year, there is a good chance an automated compliance check triggered it—not a traditional audit or manual review.

Understanding how AI works inside IRS systems helps you predict delays, respond faster, and avoid common triggers that slow your refund.