In 2022, as part of the Inflation Reduction Act, Congress increased funding for the IRS, earmarking this new investment for operations support and business systems modernization, including the incorporation of artificial intelligence (AI).
The emergence of a new generation of AI-based tools and solutions has the potential to transform how the IRS delivers services to the public and acts as a steward of taxpayer dollars.
Let’s dive into a few ways that the IRS could leverage AI in three major areas of its operations:
- AI can improve service to taxpayers through automation and taxpayer information awareness campaigns: Mistakes can happen if people aren’t sure how to complete forms or when to file them. These errors may lead to overpayments, facing an audit, or even having to pay penalties and interest. The IRS virtual assistant is already available to answer basic tax filing questions, 24/7. The ability to guide taxpayers through specific forms is expected in the future.
- AI can help strengthen tax compliance and enforcement activities: Tax fraudsters continue to devise more sophisticated ways to avoid detection. AI can help the IRS analyze all that data to identify patterns and red flags that point to possible tax fraud, then have IRS employees focus resources on high-risk cases. Over time, this would result in better overall tax compliance, increased revenue, and more fairness.
- The IRS can use AI to streamline tax and revenue operations: AI excels at digesting complex documents. It can scan through tax forms, legal records and correspondence to identify and summarize key information for IRS agents. AI can also play an important role in selecting audits by analyzing risk factors and historical data, and then identifying high-risk cases with greater accuracy.
Discover more about AI and its capabilities to transform the IRS and your agency with this video, “An AI-Empowered IRS: Revolutionizing Taxpayer Services and Operations.”
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