In an ever-evolving digital world, artificial intelligence (AI) continues to penetrate new facets of professional practice. Tax enforcement, which by definition is data-intensive, appears to be no exception. One could say we are living in a burgeoning age of automated tax auditing, where AI is beckoning a revolution. In fact, the Internal Revenue Service (IRS) is already tapping into the power of such technology.
Recent reports indicate that the IRS is adopting AI to aid in the selection of 75 large partnerships for examination, marking what is essentially a new era of tax auditing. This manifestation of AI in tax enforcement is a result of collaboration between data science and tax enforcement experts.
While the integration of AI in tax enforcement carries potential benefits, such as the potent capacity for identification of tax evasion schemes, the development also raises critical legal questions which counsel need to bear in mind.
- The implications for taxpayer rights and privacy: Can situations arise where the use of AI result in violations of privacy rights, or potential contraventions of taxpayer rights?
- The reliability of AI: Given that machine learning models are subject to error, how reliable will these AI systems prove to be when it comes to identifying tax evaders?
- The role of humans in an AI tax auditing landscape: Though AI is powerful, providing unbiased, comprehensive sweep of data, it lacks the subtle nuances of human judgement. How, then, will the balance be struck between automated auditing and human oversight?
A world of Android Agents does indeed seem a bit fantastical, but their presence in the tax landscape proves the leaps we are taking in the adaptation of AI to diverse fields. As key players in this new reality, legal professionals must continue to keep pace with these changes, staying informed of evolving legal implications, and ensuring the best interest of their clients in an AI-augmented landscape.