In August 2022, the Inflation Reduction Act (IRA) transferred billions of dollars in supplementary funding to the Internal Revenue Service (IRS). The move was significant as it signaled a new era in the IRAs enforcement and compliance strategy.
According to a report by ArentFox Schiff, the IRS is set to utilize a portion of the funds to invest in artificial intelligence (AI) and other cutting-edge technologies. The ultimate goal is to bolster the agency’s tax enforcement capabilities.
The plan does not stop there. A closer look at the IRS investment reveals that the agency is also planning to target partnerships and other flow-through entities more aggressively in its audits. This could have significant implications for businesses operating in these structures.
While the specifics of how the IRS intends to deploy its new AI capabilities are not entirely clear at this time, one could anticipate that such technologies may be used to streamline auditing processes, uncover tax evasion schemes, or make more accurate predictions about taxpayer behavior.
For corporations and law firms whose work often bridges into the realm of taxation, keeping a close watch on these developments is crucial. As the IRS embrace new technologies, tax professionals will need to rethink their own strategies, better understand AI, and prepare for a future where AI-driven audits could be the norm.
This is a developing situation that bears monitoring as it unfolds. As legal professionals, staying one step ahead can make all the difference in the fast-paced world of fiscal law.