The taxman has a new trick up its sleeve, and it’ll have tax dodgers and their accountants worried.
Utilizing a wave of funding provided by the Inflation Reduction Act, the Internal Revenue Service announced that they will be utilizing artificial intelligence to help them enforce potential tax code violations, as per a report Friday.
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AI tools will be used to go after more wealthy earners, particularly high-income tax payers earning more than $1 million with more than $250,000 in recognized tax debt. This new technology will help the agency’s compliance teams in identifying violations, emerging compliance threats, as well as improving their case selection tools to avoid nagging taxpayers with needless audits.
In response to potential concerns raised by the average taxpayer, the IRS noted in its report that it will ensure that the audit rates will not increase for those earning less than $400,000 per year.
They made clear that the new AI tools will be used to go after large violators, which they state are “75 of the largest partnerships in the U.S.,” including hedge funds, real estate investment partnerships and large law firms that have more than $10 billion in assets.
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IRS Commissioner Danny Werfel said in a statement that the latest funding push enables them to use tools that will “reverse the trend of low audit rates of wealthy filers,” while keeping audit rates low for middle and low-income filers and that the utilization of new technology helps them be ahead of the curve of tax cheats.
“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 Werfel. “We will increase our compliance efforts on those posing the greatest risk to our nation's tax system, whether it's the wealthy looking to dodge paying their fair share or promoters aggressively peddling abusive schemes. These steps are critical for the future of the nation's tax system.”
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