IRS Leverages Artificial Intelligence to Combat Tax Evasion Among Millionaires

IRS Leverages Artificial Intelligence to Combat Tax Evasion Among Millionaires.The Internal Revenue Service (IRS) has embarked on a groundbreaking partnership with artificial intelligence (AI) in its relentless pursuit of curbing illegal tax practices.

Enhancing Tax Enforcement

The IRS has harnessed the power of AI to delve into tax evasion cases involving large partnerships, encompassing hedge funds, private equity groups, real estate investors, and prominent law firms, as reported by The New York Times. This strategic move is a pivotal component of the IRS’s strategy to bolster its capabilities in addressing intricate cases that had previously overwhelmed the agency.

AI-Powered Investigations

With AI support, the IRS intends to initiate audits for 75 of the nation’s largest partnerships. These collaborations present intricate challenges that conventional IRS teams found daunting to unravel. Daniel Werfel, the IRS commissioner, acknowledged, “These are complex cases for I.R.S. teams to unpack. The I.R.S. has simply not had enough resources or staffing to address partnerships; in a real sense, we’ve been overwhelmed in this area for years.”

Empowered by Funding

Backed by an allocation of $80 billion through the Inflation Reduction Act, the IRS is poised to increase federal revenue by targeting tax evasion and sophisticated accounting practices that have historically eluded scrutiny due to resource constraints.

A Broader Agenda: Scrutinizing Wealth in 2024

The IRS’s intensified focus on partnerships is part of a broader initiative slated for 2024, which involves scrutinizing wealthier taxpayers and pursuing millionaires with substantial unpaid taxes. Furthermore, the IRS plans to bolster its oversight of digital assets and investigate how high-income taxpayers utilize foreign bank accounts to shield their financial information from disclosure, according to the report.

AI Expanding Role in Governance

The integration of AI in government institutions is not a novel concept. As AI continues to gain prominence and utility across various sectors, government bodies have adopted this technology to streamline everyday tasks and address previously arduous challenges.

California Exploration of Generative AI

In a parallel development, California Governor Gavin Newsom recently issued an executive order, calling upon the California Department of Technology and other agencies to explore the utilization of generative AI by state workers. This initiative also entails the creation of training programs to harness the potential of AI, while simultaneously recognizing the associated risks and benefits for the state government.

Transformative Technology

Governor Newsom characterized generative AI as a potentially transformative technology, likening it to the advent of the internet. He emphasized that they are only beginning to scratch the surface of what GenAI can accomplish. The state government acknowledges both the immense potential benefits and the accompanying risks that these AI tools bring to the table.