July 11, 2024

IRS Embraces Artificial Intelligence to Boost Tax Enforcement

Image Credits: Madalina Vasiliu/The Epoch Times

In a digital age where technology evolves faster than you can say “tax return,” the Internal Revenue Service (IRS) is embarking on a transformative journey to reshape tax enforcement. Armed with state-of-the-art tech, including Artificial Intelligence (AI), the IRS is all set to tackle tax evasion like never before.

IRS Commissioner Danny Werfel said, “There is a sea change taking place at the IRS in every aspect of our operations.”

“The changes will be driven with the help of improved technology as well as Artificial Intelligence that will help IRS compliance teams better detect tax cheating, identify emerging compliance threats, and improve case selection tools to avoid burdening taxpayers with needless ‘no-change’ audits,” Werfel said.

Technology is the driving force behind this change. It’s not just about catching tax evaders; it’s about doing it efficiently. AI is set to revolutionize the IRS’s compliance efforts, making audits more targeted and fairer for taxpayers.

“The new enforcement thrust is said to focus on higher-earning Americans and big corporations, with the IRS pledging not to increase audit rates for people earning less than $400,000 per year.”

Despite concerns, the IRS promises not to burden working-class taxpayers. The focus will be on higher-income individuals and corporations, ensuring a more equitable approach to tax enforcement.

Artificial intelligence is already at work, identifying tax debtors among the wealthy. It’s already placed a significant number of millionaires who owe massive taxes. Cutting-edge technology is leveling the playing field.

“In the plan, the IRS focused mostly on the customer service aspects of the technology boost, pledging to improve the taxpayer experience by introducing chatbots, online portals, and electronic notice responses.”

The IRS isn’t just about enforcement but improving the taxpayer experience. Chatbots, online portals, and electronic notices will make interacting with the IRS smoother and more efficient.

“According to IRS estimates, taxpayers in America pay around 85 percent of the total taxes they owe, with the difference between what is owed and what is paid known as the tax gap.”

The tax gap remains a challenge. It’s the difference between taxes owed and paid and a staggering $496 billion. The IRS’s technological overhaul aims to bridge this gap.

“As part of the enforcement push, the IRS is expanding its Digital Assets Compliance Campaign, targeting taxpayers involved in digital currency transactions.”

Digital assets are under scrutiny, focusing on preventing them from being used to hide taxable income. Non-compliance rates in the digital currency sector are alarmingly high, prompting the IRS to take action.

“The IRS is turning its attention towards FBAR violations, especially among high-income taxpayers.”

Foreign financial account reporting is under the IRS microscope. High-income taxpayers with significant foreign holdings are being closely monitored to ensure compliance.

“The IRS has also identified a concerning trend in the construction industry, where some contractors make payments to apparent subcontractors through ‘shell’ companies that lack legitimate business relationships.”

The construction industry isn’t immune to tax evasion. The IRS plans to combat this by expanding scrutiny on such practices, combining civil audits and criminal investigations.

With an extra $60 billion in funding, the IRS is hiring and expanding its capabilities. Over the past year, its workforce has grown by 13 percent, reaching a decade-high of nearly 90,000 employees. Plans are in place to hire 20,000 more people over the next two years, focusing on tax enforcement.

In this era of technological innovation, the IRS is not just adapting; it’s evolving. With AI and cutting-edge tech as allies, it aims to ensure tax compliance, targeting those who owe the nation’s coffers. The message is clear: the IRS is raising the bar in the fight against tax evasion.

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