by Mish Shedlock, Mish Talk:
Artificial Intelligence is a new tool of the IRS thanks to Inflation Reduction Act funding.
IRS Announces AI Will Restore Tax Fairness
I did not expect to be writing about AI twice today. But here we are. Reader “Mark” sent a link to this IRS announcement worth discussing.
IRS announces sweeping effort to restore fairness to tax system with Inflation Reduction Act funding
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Capitalizing on Inflation Reduction Act funding and following a top-to-bottom review of enforcement efforts, the Internal Revenue Service announced today the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation’s tax laws.
The effort, building off work following last August’s IRA funding, will center on adding more attention on wealthy, partnerships and other high earners that have seen sharp drops in audit rates for these taxpayer segments during the past decade. 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.
As part of the effort, the IRS will also ensure audit rates do not increase for those earning less than $400,000 a year as well as adding new fairness safeguards for those claiming the Earned Income Tax Credit. The EITC was designed to help workers with modest incomes.
Prioritization of high-income cases. In the High Wealth, High Balance Due Taxpayer Field Initiative, the IRS will intensify work on taxpayers with total positive income above $1 million that have more than $250,000 in recognized tax debt. Building off earlier successes that collected $38 million from more than 175 high-income earners, the IRS will have dozens of Revenue Officers focusing on these high-end collection cases in FY 2024. The IRS is working to expand this effort, contacting about 1,600 taxpayers in this category that owe hundreds of millions of dollars in taxes.
Expansion of pilot focused on largest partnerships leveraging Artificial Intelligence (AI). The complex structures and tax issues present in large partnerships require a focused approach to best identify the highest risk issues and apply resources accordingly. In 2021, the IRS launched the first stage of its Large Partnership Compliance (LPC) program with examinations of some of the largest and most complex partnership returns in the filing population.
Earned Income Tax Fraud
The IRS publication on the Earned Income Tax Credit contains this amusing statement: “IRS estimates that between 21 percent to 26 percent of EITC claims are paid in error. Some of the errors are unintentional caused by the complexity of the law, but some of the claims are intentional disregard of the law.”
“It’s critical that the agency addresses fundamental gaps in tax compliance that have grown during the last decade,” said IRS Commissioner Danny Werfel (first link).
So let’s not focus on EIC with a known 21-26 percent error rate. Instead, let’s go on fishing expeditions.
Why not do both? I suppose a fundamental error rate at least one in five is not fundamental enough. Alternatively, it’s simply not fair.
Artificial Intelligence vs Screen Writers and Actors
Fearful of losing jobs to AI, the writers and actors went on strike starting July 14. Did you notice?
On July 24,I asked If the Screen Actors and Writers Strikes Went on Forever, Who Would Care?
Who’s Better at Generating Innovative Ideas, ChatGPT or M.B.A. Students?
Earlier today I asked Who’s Better at Generating Innovative Ideas, ChatGPT or M.B.A. Students?
I compare and contrast the protests by the Screen Writers and Actors guilds to that of the UAW.
It’s really the same story. Change happens. It’s disruptive whether by AI or any other technology.
