The IRS will use AI to crack down on ultra-wealthy taxpayers and partnerships

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The Internal Revenue Service plans to use artificial intelligence to crack down on tax schemes by wealthy individuals and businesses, the agency said Friday. The move is part of an overhaul of the agency after billions of dollars were siphoned off from the Inflation Reduction Act.

The federal tax collector said AI will help audit 75 of the largest partnerships in the United States by the end of the month, including hedge funds, real estate investors, publicly traded companies and large law firms. Each partnership averages about $10 billion in assets.

“For AI, it helps us identify patterns and trends that we couldn’t see before,” said Daniel Werfel, IRS Commissioner. “It’s helping us figure out some of the people who represent the greatest risk of non-compliance, in other words, who are the big partnerships that protect the income and where we can get it.”

The decision to use AI is part of the agency’s new focus on combating sophisticated schemes used by the wealthiest tax evaders, the statement said. It said “dozens of revenue officers” will be assigned to the same task, along with improved technology, in line with artificial intelligence.

“Efforts … will be focused on focusing more on the wealthy, partnerships and other high earners who have seen a sharp decline in audit rates for these taxpayer segments over the past decade,” the announcement said.

According to the announcement, the program will target individuals with more than $1 million in reported income who have a recognized tax debt of more than $250,000. The agency cites 1,600 taxpayers in this category, collectively owing hundreds of millions of dollars in taxes. It also plans to increase its focus on digital assets, noting that 75 percent of taxpayers using digital asset exchanges do not comply with tax laws.

The IRS will begin experimenting with artificial intelligence to help with general income tax accounting in 2021, it said. In June, it announced it would use voice and chat bots to help taxpayers with payments and collections and reduce call times.

Julie Weil contributed to this report.

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