At the Intersection of Technology, Law, and Business
January 11, 2024 - Artificial Intelligence

AI Trends For 2024 - IRS Adopts AI-Powered Audit Selection Tools, Hires Technology-Focused Leadership

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On December 13, 2023, the IRS revealed a revamped leadership structure, introducing Chief Information Officer and Chief Operating Officer positions to leverage technology more effectively. The move aligns with IRS Commissioner Danny Werfel’s vision of employing AI and advanced analytics to streamline tax processes, facilitate communication, and optimize audits for both the IRS and taxpayers. This technological shift supports the IRS’s initiative to use AI in audit selection, addressing a decline in audits for high-income individuals, a strategy disclosed in a September 8, 2023 statement. The focus is on enhancing proficiency in detecting tax evasion, recognizing compliance threats, and refining case selection tools.

The IRS has stated that audit rates for those earning less than $400,000 annually will remain unaffected. Additionally, AI safeguards will be implemented for Earned Income Tax Credit claims, aiming to prevent exploitation by unscrupulous tax preparers. The IRS’s plan involves expanding high-income and high-wealth compliance efforts, employing AI in initiatives like the High Wealth, High Balance Due Taxpayer Field Initiative. Specifically, the Large Partnership Compliance program, utilizing AI and machine learning, will scrutinize 75 of the largest U.S. partnerships, each possessing over $10 billion in assets, addressing historically limited examination coverage of such entities.