IRS to Use Artificial Intelligence to Catch Wealthy Tax Cheaters
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1970-01-01 08:00
The IRS is preparing to use AI programs to help it uncover how wealthy tax

The IRS is preparing to use AI programs to help it uncover how wealthy tax cheaters have been dodging paying their fair share.

The agency says it's “shifting more attention” to high-income earners and large corporations that’ve been abusing US tax laws. The IRS notes that high earners “have seen sharp drops in audit rates” in the past decade.

In response, the IRS is tapping artificial intelligence and improved technology to help identify tax-cheating schemes that previously went undetected, including tax fraud schemes that can ensnare unsuspecting victims.

“Anchored by a deep respect for taxpayer rights, the IRS is deploying new resources towards cutting-edge technology to improve our visibility on where the wealthy shield their income and focus staff attention on the areas of greatest abuse,” said IRS Commissioner Danny Werfel in the announcement.

The IRS is adopting the technology as industries everywhere are also using AI to analyze complex problems, such as developing new treatments for diseases or solutions to stop climate change. Specifically, the IRS wants to untangle complex financial schemes suspected of shielding taxable assets.

For now the agency is remaining mum on details about the AI technology. But the IRS says it’s going to collaborate with “experts in data science and tax enforcement, who have been working side-by-side to apply cutting-edge machine learning technology” in areas including general income tax, accounting, and international tax.

“By the end of the month, the IRS will open examinations of 75 of the largest partnerships in the US that represent a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries,” the agency added. “On average, these partnerships each have more than $10 billion in assets.”

The agency is adopting the technology after it secured $80 million from the Inflation Reduction Act, which supplied the funding to help modernize IT systems at the IRS. The agency plans on announcing more details in the coming weeks and months. But in the meantime, the AI use is facing some criticism over concerns the technology will make mistakes, resulting in erroneous or biased tax enforcement.

“This is one more way for [the IRS] to put some distance in their decision-making,” Republican tax activist Grover Norquist told The New York Times. “They can say, ‘Oh, we’re not auditing people we don’t like. This is science.’”

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