US IRS to Use AI to Catch Tax Evaders

Ever felt like the super-rich and massive companies somehow manage to sidestep taxes, while you’re left scratching your head over your tax returns? Well, it turns out you’re not alone. The American Internal Revenue Service (IRS) is also scratching its head, but it’s planning to do something about it. The IRS is preparing to use artificial intelligence (AI) to catch wealthy individuals and big corporations that have been, let’s just say, a bit creative with their taxes.

The Shift in Focus

For years, ordinary folks have been the ones most often getting audited, meaning they get a thorough check-up on whether they’ve been paying the right amount of tax. Meanwhile, high earners and big companies have been enjoying fewer audits. According to the IRS, the number of times these groups have been audited has dropped significantly over the last decade. So, they’re trying to balance the scales.

To put it in simpler terms, the IRS is starting to pay more attention to the big fish who have been sliding through the net. Why? Because they are the ones with the most complex ways of dodging tax obligations, and that’s a lot of lost revenue for public services.

How Will AI Help?

Artificial intelligence sounds like something from a sci-fi film, but it’s becoming a useful tool for solving real-world problems. Industries are using it for things like finding cures for diseases and battling climate change. So why not use it for tax enforcement, too?

In this case, the IRS will use AI to sniff out complicated financial schemes that are designed to hide taxable income. Imagine a sniffer dog that can find a needle in a haystack—well, AI is that sniffer dog but for numbers and financial loopholes. The goal is to use this smart tech to flag suspicious tax returns or dodgy accounting that a human might miss. That way, the IRS can go after the tax cheats more efficiently.

The Expert Collaboration

The IRS isn’t diving into this all alone. They’re teaming up with data scientists and tax experts to make the most of machine learning technology. This will be used in various areas, like general income tax, accounting practices, and international tax loopholes. Think of it as assembling a team of experts who’ll train the AI to be the world’s best tax detective.

What’s Coming Up?

The IRS has some big plans. By the end of this month, they will begin auditing 75 of the biggest partnerships in the United States. These include hedge funds, real estate investment firms, and large law firms. To give you an idea of how big these partnerships are, they each have assets averaging over $10 billion.

The money for all this tech comes from an $80 million budget given to the IRS through the Inflation Reduction Act. This Act has helped modernize their IT systems, giving them the tools they need to fight modern financial shenanigans.

Critics Weigh In

As you can imagine, not everyone is happy about this. Critics are concerned that the technology might make mistakes or have biases that could unfairly target certain people or companies. Republican tax activist Grover Norquist has even said that the IRS could hide behind the label of “science” to defend their decisions, even if they’re controversial.

Conclusion: A New Era for Tax Enforcement

So there we have it. The IRS is bringing out the big guns—or rather, the big algorithms—to ensure that everyone pays their fair share. While it’s early days, and critics have their concerns, it could mark a new era in tax enforcement. If it works as planned, it might just make the system a little fairer for everyone.

Will the UK follow suit? Only time will tell, but this could be the way tax authorities worldwide start operating in the near future.