Introduction: A New Era for Tax Compliance
The Internal Revenue Service (IRS) is stepping up its game in a big way. With the backing of the Inflation Reduction Act, the IRS is launching a comprehensive effort to bring fairness back to the tax system. And guess what? Artificial Intelligence (AI) is playing a pivotal role in this transformation.
The IRS’s New Focus: High-Income Earners and Corporations
For years, audit rates for high-income earners and large corporations have been on the decline. The IRS is flipping the script by shifting its focus back to these groups. The aim is to ensure that everyone pays their fair share, especially those who have the most.
The Role of AI in IRS Compliance
AI isn’t just for self-driving cars and virtual assistants anymore. The IRS is harnessing the power of AI to identify tax evasion schemes and improve the efficiency of audits. This technology will help the IRS pinpoint areas of non-compliance, making the tax system more equitable for all.
Fairness in Auditing: Protecting the Average Taxpayer
While the IRS is ramping up its focus on high-income individuals and corporations, it’s also taking steps to protect average earners. Audit rates for those earning less than $400,000 a year will not increase, ensuring that the tax burden remains fair.
The Earned Income Tax Credit (EITC) Safeguards
The EITC is designed to help workers with modest incomes. The IRS is implementing new safeguards to ensure that people who claim these credits are not exploited by unscrupulous tax preparers.
The IRS Commissioner’s Commitment
IRS Commissioner Danny Werfel is committed to reversing the trend of underfunding and low audit rates for wealthy filers. With the new funding from the Inflation Reduction Act, the IRS plans to make its compliance efforts more effective.
High-Income/High-Wealth Compliance Work
The IRS is intensifying its work on taxpayers with incomes above $1 million and recognized tax debt over $250,000. This is part of a broader strategy to focus on high-risk cases and collect what is rightfully owed to the government.
AI in Partnership Audits
The IRS is expanding its Large Partnership Compliance (LPC) program, leveraging AI to identify high-risk issues in large and complex partnership returns. This will help the IRS apply its resources more effectively.
Targeted Compliance Work in FY 2024
The IRS has identified several priority areas for compliance in the upcoming fiscal year. These include digital assets, FBAR violations, and labor brokers, among others.
Protecting Taxpayers from Scams
The IRS is also committed to protecting average taxpayers from scams and fraudulent schemes. Awareness campaigns and consumer protection initiatives are part of this effort.
Equity in Audits and Identity Theft Protection
The IRS is making improvements in audits involving Earned Income Tax Credits and will continue its work to protect taxpayers from identity theft, building on the efforts of the Security Summit initiative.
Conclusion: A Balanced Approach to Tax Compliance
The IRS is taking a multi-faceted approach to restore fairness to the tax system. By leveraging AI and focusing on high-income earners and corporations, the IRS aims to create a more equitable tax environment for all.
FAQs
- How is the IRS using AI in tax compliance?
- The IRS is using AI to identify tax evasion schemes and improve the efficiency of audits.
- Will the new IRS focus affect average earners?
- No, the IRS is ensuring that audit rates for those earning less than $400,000 a year will not increase.
- What are the IRS’s priority areas for compliance in FY 2024?
- The IRS will focus on digital assets, FBAR violations, and labor brokers, among other areas.
- How is the IRS protecting taxpayers from scams?
- The IRS is running awareness campaigns and consumer protection initiatives to safeguard taxpayers.
- What is the Earned Income Tax Credit (EITC)?
- The EITC is a tax credit designed to help workers with modest incomes. The IRS is implementing safeguards to protect those who claim this credit.
