Goldburd | Goldburd McCone LLP

For nationwide tax guidance, call:
212-302-9400 or toll-free at 844-653-2873.

Goldburd | Goldburd McCone LLP

For nationwide tax guidance, call: 212-302-9400 or toll-free at 844-653-2873.

Serving Individual And Corporate Tax Clients Nationwide From Our New York, New Jersey, Florida And California Offices

Steven Goldburd and Benjamin A Goldburd

Since 1983, our tax firm has skillfully represented individuals and corporations across the United States and around the globe from our offices in New York, New Jersey, California and Florida.

AI and the IRS: How did the IRS use this new tool, and how did it go?

On Behalf of | Jun 5, 2024 | Tax Audits

The Internal Revenue Service (IRS) was clear about its intentions: it was going to use artificial intelligence (AI), and AI was going to help the agency track down tax cheats. April 15, Tax Day, has come and gone and now we wonder: did it work? Will we see any major issues as the agency sorts through filings making use of this new tool?

How did the IRS use AI?

The agency explained that it would use AI to sort through returns using various algorithms to look for patterns and trends that could be indicative of tax evasion with a focus on the wealthy. Examples of such patterns that could trigger an audit was a failure to file tax returns yet purchase luxury items and previous Report of Foreign Bank and Financial Accounts (FBAR) violations.

How did it go?

The IRS states that Tax Day concluded “hiccup-free” even though they had record-setting web traffic. Although AI may have helped ensure the agency received filings without major issues on Tax Day, there is much we have yet to learn. The results of the use of this tech to review returns and trigger audits is a primary example and critics have voiced concern, noting that when it comes down to reviewing the filings AI’s history of biases could pose a problem. A report released last year noted that black taxpayers had three-to-five-time higher rate of audit than other taxpayers. Researchers behind the report pointed to the computer algorithms used by the IRS.

Although it is too early to know the impact of the use of AI on tax returns for 2023, we do know that the IRS plans to continue to implement this tool.

What if my returns are flagged for an audit?

The IRS generally notifies those flagged for a federal tax audit through a mailed correspondence. It is important to review any mailing from the IRS carefully. It should include information about the agency’s intentions and deadlines. A failure to act within the deadlines can limit your options to respond.

You do not have respond on your own. You have a right to legal representation when dealing with the IRS. The attorneys at Goldburd McCone are experienced with tax audits and related issues. They can use this experience to help guide you through the process and better ensure a more favorable outcome.