The U.S Internal Revenue Service (IRS) is embracing a more dedicated approach towards technology in tax administration. According to a recent report, the federal agency is looking to boost its utilization of Artificial Intelligence (AI) in auditing partnerships, larger corporations, and alleged tax shelter promoters.
In a recent official release, the agency communicated its intent to focus on ‘complex structures and tax issues present in large partnerships,’ requiring a meticulous approach to identify ‘the highest risk issues.’ Commissioner Werfel further added emphasis on their commitment to employ AI to manage the daunting task better.
According to experts, this represents a substantial shift in IRS practices which, if properly implemented, could increase efficiency and allow for more precise detection of dubious transactions.
This move falls in line with the global trend of governments and bureaucratic institutions exploiting AI and similar technologies to streamline processes and improve both efficiencies and outcomes.
However, as prudent as this approach may be, it also raises questions relating to data privacy and the potential for inadvertent errors that could result from the broad deployment of AI systems. Corporations, partnerships, and legal advisors would be well-served to understand the potential implications of this new enforcement strategy and prepare accordingly.
While there are still many unknowns about how the IRS plans to implement and leverage AI, it seems clear that technology’s influence on the tax world will only continue to grow. As such, legal professionals need to keep abreast of developments in this field and ensure they are equipped to navigate this new world.