Artificial Intelligence is a new tool of the IRS thanks to Inflation Reduction Act funding. 
IRS Announces AI Will Restore Tax Fairness
I did not expect to be writing about AI twice today. But here we are. Reader “Mark” sent a link to this IRS announcement worth discussing.
IRS announces sweeping effort to restore fairness to tax system with Inflation Reduction Act funding
Capitalizing on Inflation Reduction Act funding and following a top-to-bottom review of enforcement efforts, the Internal Revenue Service announced today the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation’s tax laws.
The effort, building off work following last August’s IRA funding, will center on adding more attention on wealthy, partnerships and other high earners that have seen sharp drops in audit rates for these taxpayer segments during the past decade. The changes will be driven with the help of improved technology as well as Artificial Intelligence that will help IRS compliance teams better detect tax cheating, identify emerging compliance threats and improve case selection tools to avoid burdening taxpayers with needless “no-change” audits.
As part of the effort, the IRS will also ensure audit rates do not increase for those earning less than $400,000 a year as well as adding new fairness safeguards for those claiming the Earned Income Tax Credit. The EITC was designed to help workers with modest incomes.
Prioritization of high-income cases. In the High Wealth, High Balance Due Taxpayer Field Initiative, the IRS will intensify work on taxpayers with total positive income above $1 million that have more than $250,000 in recognized tax debt. Building off earlier successes that collected $38 million from more than 175 high-income earners, the IRS will have dozens of Revenue Officers focusing on these high-end collection cases in FY 2024. The IRS is working to expand this effort, contacting about 1,600 taxpayers in this category that owe hundreds of millions of dollars in taxes.
Expansion of pilot focused on largest partnerships leveraging Artificial Intelligence (AI). The complex structures and tax issues present in large partnerships require a focused approach to best identify the highest risk issues and apply resources accordingly. In 2021, the IRS launched the first stage of its Large Partnership Compliance (LPC) program with examinations of some of the largest and most complex partnership returns in the filing population.
Earned Income Tax Fraud
The IRS publication on the Earned Income Tax Credit contains this amusing statement: “IRS estimates that between 21 percent to 26 percent of EITC claims are paid in error. Some of the errors are unintentional caused by the complexity of the law, but some of the claims are intentional disregard of the law.”
“It’s critical that the agency addresses fundamental gaps in tax compliance that have grown during the last decade,” said IRS Commissioner Danny Werfel (first link).
So let’s not focus on EIC with a known 21-26 percent error rate. Instead, let’s go on fishing expeditions.
Why not do both? I suppose a fundamental error rate at least one in five is not fundamental enough. Alternatively, it’s simply not fair.
Artificial Intelligence vs Screen Writers and Actors
Fearful of losing jobs to AI, the writers and actors went on strike starting July 14. Did you notice?
On July 24,I asked If the Screen Actors and Writers Strikes Went on Forever, Who Would Care?
Who’s Better at Generating Innovative Ideas, ChatGPT or M.B.A. Students?
Earlier today I asked Who’s Better at Generating Innovative Ideas, ChatGPT or M.B.A. Students?
I compare and contrast the protests by the Screen Writers and Actors guilds to that of the UAW.
It’s really the same story. Change happens. It’s disruptive whether by AI or any other technology.
“What, me worry?”
Some on Twitter predict, even cheer for my demise to AI writers for my stance against the UAW.
I am so small no one would even want to bother to try to replace me.
If I am replaced by AI, so be it. No one is owed a living. Not the Screen Actors Guild, not the UAW, and not me.
Tax the Robots
AI is so threatening that Paul Krugman and Bernie Sanders want to tax the robots.
For discussion, please see Will AI Replace Skilled Programmers? When? Should We Tax Robots?
To Stop AI, Lunatics Are Willing to Risk a Global Nuclear War
On April 3, I noted To Stop AI, Lunatics Are Willing to Risk a Global Nuclear War
If somebody builds a too-powerful AI, under present conditions, I expect that every single member of the human species and all biological life on Earth dies shortly thereafter says Eliezer Yudkowsky, an American artificial intelligence researcher.
Yudkowsky also said countries should be “willing to run some risk of nuclear exchange if that’s what it takes to reduce the risk of large AI training runs.”
I commented …
Seriously Crazy
Any scientist seriously proposing AI is certain to kill all of mankind and that preemptive nuclear war is preferable, is seriously crazy.
Should Yudkowsky resign from his current job and undertake a new career for which he is highly suited, that being a science fiction writer?
The answer isn’t clear, actually. Yudkowsky now looks like a raging mad lunatic. As a science fiction writer he might be taken far more seriously.
Nuclear War Risk Less Than AI Risk
Not to worry, a nuclear exchange wouldn’t kill everyone but it is certain that AI would.
So there you have it. We should resort to a nuclear war, if necessary, to stop AI.
Hooray! That would save the Screen Writers Guild. As an added bonus, nuclear war would rein in the IRS for those still living.
The IRS will use AI to walk on water.
To get to the other side of course.
Yudkowsky is only slightly crazier than the people in charge of American nuclear doctrine and policy, threatening other countries, plans for preemptive strikes, tactical nukes, escalate to deescalate, lower the threshold, and all the other semantic knots they tie.
The list of suspects ought to be publicited. Maybe the AI thinks all US senators are guilty, or the IRS employees, or, maybe, certain Hollywood actors…
We all know about the Turing Test. But here’s a simpler one for IRS AI: The Hunter Biden Test.
Replace every government parasite within 100 miles of Washington D.C. with AI, or a Labrador Retriever.
It’s a special case of the more general one which drives all development in financialized idiotopias:
“We” will use hype, and therefore will be great.
Emphasis always being “will.” At some point. NEVER, ever: Are great. Since no “we” ever are. Nor ever will be. No matter how much childbrained hype is thrown at it.
Call me extremely skeptical with this entire premise. First and foremost, the fact that “AI is a new tool of the IRS thanks to the Inflation Reduction Act funding”, scares the crap out of me! What has to be right up there near the top, of Bills that “DO NOT DO” what they are called and claim to do. There is nothing BUT Inflation in this Bill!
“Capitalizing on Inflation Reduction Act funding” (i.e. Spending $$$ we don’t have on things we don’t need, and by people who were just hired and therefore are not qualified) and “following a top-to-bottom review of enforcement efforts” (i.e. Looking at ways to Beef Up our $$$ Grabs from our less fortunate and lower earning Citizens, who can’t fight back), the Internal Revenue Service announced today the start of a “sweeping, historic effort to restore fairness in tax compliance” (i.e. go after more of the people who don’t have the funds to fight back) by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation’s tax laws (i.e. Our Friends will be notified where to fix the issues before we finalize our approach to collect)…
AI is Programmed by Humans (aka: Agendas), and as such will be programmed to “Look For” and “Punish” Whom THEY SELECT!!! Please don’t tell me the programmers would “Never do that” because they do it Now, and have been doing it Since Computers were developed. The Original AI via programming code. The IRA Bill is a boondoggle payment Plan for Wanted Programs (i.e. 80K IRS Agents & Climate Activist NGO Agencies and the like) to Control the Masses (i.e. The Little Guy). I just don’t buy into this at all, as it appears to be another Giant Governmental Scam of some sort, that we will find out about in the usual way: “SLOWLY BUT SURELY” so we don’t See It & Feel It Coming…
It was happening long before computers.
A Welfare Analysis of Tax Audits Across the Income Distribution
William C. Boning, Nathaniel Hendren, Ben Sprung-Keyser & Ellen Stuart
Working Paper 31376
DOI 10.3386/w31376
Issue Date June 2023
We estimate the returns to IRS audits of taxpayers across the income distribution. We find an additional $1 spent auditing taxpayers above the 90th income percentile yields more than $12 in revenue, while audits of below-median income taxpayers yield $5. We draw upon comprehensive internal accounting information and audit-level enforcement logs to quantify the average costs and revenues associated with each audit. We begin by estimating the average initial return to all audits of US taxpayers filing in 2010-2014. On average, $1 in audit spending raises $2.17 in initial revenue. Audits of high-income taxpayers are more costly, but the additional revenue raised more than offsets the costs. Audits of the 99-99.9th percentile have a 3.2:1 return; audits of the top 0.1% return 6.3:1. We then exploit the 40% audit reduction between tax years 2010 and 2014 to examine the returns to marginal audits. We find they exceed the returns to average audits. Revenues remain relatively unchanged but marginal costs fall below average costs due to economies of scale. Next, we use randomly selected audits to examine the impact of an initial audit on future revenue. This specific deterrence effect produces at least three times more revenue than the initial audit. Deterrence effects are relatively consistent across the income distribution. This results in the 12:1 return above the 90th percentile. We conclude by estimating the welfare consequences of audits using the MVPF framework and comparing audits to other revenue raising policies. We find that audits raise revenue at lower welfare cost.
…
https://www.nber.org/papers/w31376
that analysis sounds like rubbish. but who knows. what i do know is that certain cities in usa are moving to a more “italian” model of tax compliance. italy hides around 1/3 of her “gdp” under the table. from cab drivers to doctors and bond traders. in cities like LA and Phoenix and brooklyn…………where there is a huge cash economy among immigrants………..the IRS doesn’t stand a chance. the IRS has ignored chinatown NYC for decades for this exact reason. it is futile. another point. the us tax code is so generous if one sets up one’s life to get the goodies. r/e, energy, ranching, farming, arms production, and many more. of course one needs to be an owner. not a serf. tom wheelright CPA writes the best books about this topic. it also applies internationally. societies from monarchies to republics……. have always given men who produce, housing, food, energy, armies………a great deal of goodies. i always laugh at middle aged men who haven’t even figured out the game of life.
That’s one reason CBDCs are coming fairly soon.
Why does it “sounds like rubbish”? Based on what special info that you are privy to?
As to the cash economy, what are you going to do when you hit old age and/or can’t work any longer? No Medicare or Social Security for you!
There is a great deal of “gloom and doom” commentary regarding AI thinking Skynet and Terminators are just a few years away but it would be far more advantageous for evil artificial intelligence to make subtle genetic changes to humanity and turn humans into slaves to serve AI. It’ll be more like the Matrix than Terminator.
And the conspiracy theorist in me thinks this has been happening for millions of years already but not by AI but by highly intelligent fungus. Certain strains of Cordyceps infect insects and turn them into mindless zombies. The fungus then makes the insects move to warm and humid climates where the Cordyceps have the highest probability of sporing and spreading. Now what if a clever fungus have infected the human brain and been silently and secretly controlling human minds teaching them how to create oil & gas so CO2 emissions rise to make the planet warmer so that the fungus can thrive globally in all regions cold and dry as well as warm and humid. Teach humans how to build spacecraft so the fungus can hitch a ride and spread to other planets.
https://www.youtube.com/watch?v=vijGdWn5-h8
The biggest issue I have with the idea of Cordyceps and humanity is that season 2 is taking so damned long.
Have you considered writing science fiction books?
You are wrong. It’s gut bacteria that controls our minds and gut bacteria wants to colonize Mars and cover it in gut bacteria. We are just their vessels.
I’m I’m I’m I’m I’m I’m I’m fuuufuuufine.
They telegraphed this. They’ve had multiple year-long job postings for AI expertise. Also blockchain — they’re going after the crypto folks too.
https://www.usajobs.gov/Search/Results?g=12&g=13&g=14&g=16&g=15&g=9&g=10&g=11&j=2210&j=1550&j=1801&j=1560&a=TR93&s=startdate&sd=desc&p=1&gs=true&k=artificial%20intelligence
looks like the blockchain job openings just closed a few days ago after being open for a year: https://www.usajobs.gov/Job/687593600
AI will generate a list of suspects worth auditing. Agents will then evaluate the list for errors. This improves efficiency.
will ai work on ancient computer systems? wondering.
Perhaps the IRS should get rid of their computers, which they have great difficulty maintaining and upgrading. Maybe go with Amazon’s AWS?
Jojo, methinks you belie insanity. DO YOU REALLY want a more efficient IRS regime, aimed at to take more of YOUR money?
Let me guess: you still wear masks and took EVERY vaccine presented? RIGHT?
If the IRS becomes more efficient at collecting the taxes owed by the top 10%, then they may leave everyone else alone.
Haha, nice thought, but it has never happened. It always trickles down.
We will be subject to AI adults in time. Why? Because the government and its agencies always lie. It’s a truism we can rely on just as the sun rises.
The Revenue Act 1913 imposed a 1% tax on $3,000 and above incomes and a 6% rate for earnings over $500,000. Roughly 3℅ of the population was affected by this unconstitutional theft. And guess how they sold the confiscation of cash to the public?
They were told the new tax was only for the rich and would never impact lower incomes. They still use this same lie today in every money-raising scheme. Don’t worry; only the greedy rich will pay.
It’s a simple strategy, making the rich the enemy, socking-it-too them for the benefit of the rest of the lowly population. We in government are on your side, after all.
yes. and of course the oilmen that lobbied the congress to build the IRS code to their benefit, created a huge windfall for them. all the while telling the middlebrows and lumpenproles that the tax code was for “rich”. as taleb explains, it was karl marx who understood it is easier to control the slaves by telling them they are employees and not slaves. as taleb also explains, the 3 most dangerous things in modern life. carbs, opiates, and a salary paid by your owner.
Every government gets themselves into the same position. They tax something, use the money and then discover that they need more money. The only way to get more money is to increase present taxes or tax something new.
It’s a feature of government, not a bug.
They don’t need more money; they spend more money.
You missed outright confiscation through Inflation and ultimate they will seize our assets….. esp if we mouth off.
Got an example of someone getting their assets seized for saying something that didn’t involve a threat?
Didn’t think so.
What happened in Canada to the Truckers protest is an example of this. All those who were there had their bank accounts frozen. All the money raised by GoFundMe to support the protest was seized.
Civil Asset Forfeiture is another example. In those cases it doesn’t matter what you say or whether you are a threat or not. Police just seize your cash under the guise you might be a criminal.
Answering your comment out of context, I’d simply direct you to search for things like “RICO asset forfeiture.”
In context of the reply to DJ, you’re basically saying they’ll inflate our $ to 0 no matter what we say or do, it’s not an issue of us trying to be free, they’ll be stealing everything we have one way or another.
So regardless of context, your defending one sucky situation or another.
So i guess we don’t need those 87k additional irs agents!!!!
They will never lose those jobs. Governments feed on BIG populations of PEOPLE, wherein they steal our earnings and borrow to rest so that they can GLEAN as much from it all as possible.
NEVER believe in “PARTY” or PROMISES as the entire regime depends on naive thinking.
Look at the Navy LCS program. Total waste of money
AI is not needed to start enforcement with the Biden Crime Family. The IRS refuses to audit the 2017 and 2018 returns of the Bidens in which they evaded $500,000+ in Medicare payroll taxes. The Biden Crime Family has also evaded scrutiny (except by House Republicans) for its long usage of influence pending including tax evasion. The Biden Crime Family has employed a large number of shell companies to launder money received from companies closely connected with foreign governments under the influence of the head of the Biden Crime Family. House Republicans have shown some of the criminal dealings of the Biden Crime Family, but House Republicans have limited resources and authority to investigate. The media and most importantly government agencies (IRS, DOJ, and FBI) have buried investigations of the Biden Crime Family.
Democrats and their media allies have a carefully crafted false narrative about tax compliance. The false narrative indicates that low income groups are subject to more scrutiny. The reality is that refundable tax credits have high levels of fraud. The scrutiny about the fraud is superficial with correspondence audits. The IRS under Democrat control has buried attempts to perform real crack downs on the abundant fraud in refundable tax credits.
The usage of AI means that the IRS intends to make life difficult for honest, high income earners with costly, time consuming audits. Always remember, the tax law is whatever the IRS asserts. You can become bankrupt defending against the IRS in Tax Court with the burden of proof on the taxpayer instead of the IRS.
I think the IRS would get more ROI from going after Trump, his businesses and his family.
NO, JOJO, the BIDENS are the “best” at cheating, stealing and lying VERY successfully—they OWN the system. And, your point is well taken, because Trump THOUGHT he had them and they are not giving up. BUT, remember, Trump is part of the ELITIST REGIME, so it is ALL for show, as they ALL LIE, CHEAT, AND STEAL and my perverse words for it is they are EXCELLENT, SUPERLATIVE at CHEATING, LYING, STEALING and then convincing MOST of you to VOTE THEM IN.
My wish for 2024 and beyond is a WOKE UP VOTING PUBLIC that actually REFUSES to vote for these scumbags and writes in someone who MIGHT represent us but who that might be is a quandary.
Biden is somehow a master criminal, and a drooling old Alzheimer’s case at the same time.
Mad? That’s cognitive dissonance.
Valid point. It’s not possible.
However, he could have been corrupt when competent, hired some very talented staff that were ok with his corruption, and now that Biden has fleeting moments of competence vs. dementia, his very competent staff carry on with the old corrupt ways. Not only is that plausible, I think it’s likely.
I don’t post often but this exchange is hard to understand. If both Biden and Trump both did criminal actions, should you not both be saying they should both be charged/investigated/audited?
I didn’t think tax evasion was a partisan issue.
Please note: I’m from Canada so neither ever was or ever will be my president.
The problem with the media is this: Biden’s crimes are only reported by alt-media and are censored by big tech at requests or threats from the government. Legacy media heavily reports Trump’s crimes with no censorship whatsoever.
Biden’s crimes have been recorded and have many whistleblower accounts, phone recordings, foreign government witnesses, paper trails, and laptop evidence from hell. Additionally, these crimes have spanned decades.
Trump’s crimes are vague, using overlapping charges or double jeopardy and unconstitutional venue changes. Furthermore, the same tactics that the Declaration of Independence accused the King of England of practicing over 300 years ago are back.
We are witnessing the collapse of the rule of law, the structure that glues a peaceful society together. Soon enough, the other side will engage in justice playback, thus beginning a process of power similar to countries in South America.
You are not safe in Canada, either. We can see the very same processes practiced that we had. The end goal is to have one world President run by one world deep state operator. So you see, don’t fool yourself into thinking what happens in the US will not affect you. Soon, we will have no sovereignty and be subject to one President unless we decide to work together to derail the evil scheme.
(By the way, when I use the word crime or crimes, this means alleged offenses.)
The Bidens et al. are our overlords, and the IRS will not rock the boat.
What about the Trump Crime Family?
Insert Trump at every use of the name Biden
IRS Artificial Intelligence will work about as well as those Zenith computers they still use. Believe me, I’m not complaining.
the tax code is chock filled with free credits and businesses that men who understand them, think the IRS is their friend. the middlebrows who are payed salaries do really pay the freight. going through life paying big taxes demonstrates a man who never bothered to read the rule book before the game of adult life started. i’d surmise the tax attorneys…….will be using AI to scour the tax code and regs for unknown loopholes for their clients.
“tax attorneys…….will be using AI to scour the tax code and regs for unknown loopholes for their clients.”
Excellent point
The AI hype is just crazy. People and computer programs have been analyzing things for years. Millions of hours have been spent looking at the tax code.
Catching errors or cheating is a pretty obvious use for AI. Feed the algo a few million tax returns that have been carefully evaluated to train it, and you’re off to the races.
The problem is, it’s going to catch all sorts of honest mistakes and really piss people off, because the tax code is a nightmare to navigate. Maybe that will finally generate some momentum for the IRS to just send you your tax bill every year, which you can protest if you want, rather than forcing everyone to hand over $200 to HR Block just to pay their taxes.
Hell, someone smart is going to just AI-ify tax accounting anyway, probably.
Damn – There goes the Screen Writers Guild
Why not pose ChatGPT the following simple query:
“Rewrite and simplify the existing tax code of the USA with the goal of eliminating redundancies and conflicts.”
I wonder what would come out of this?
Let’s take this a step further.
Require the IRS to invoice each tax payer once/year in the month of the taxpayer’s choice. The invoice should include calculation details. The taxpayer then has 30 days to pay or dispute the amount. If they dispute, they then need to file taxes. If they pay the amount, no need to file anything — 0 time spent, $0 costs for filing taxes.
The IRS, and Government overall aims at INEFFICIENCIES in making our lives perfectly miserable.
They tax EVERY TURN, EVERY AVENUE, EVERY STRUCTURE of our terrible lives >>> all over the world.
NEXT UP, FOLKS, and Mish should consider this: A USA WIDE VAT! Tax EVERY SALE with a US Government collection regime that will kill off everyone else already starving. Imagine then: they tax the shit out of our INCOMES, and EVERY PENNY OF OUR OUTGO.
That is the goal so we can keep the Government Pensions running smoothly. I have a cousin, retired from the State of Cal who makes $176,000 a year in a Pension. She was NOT a top employee. GOVERNMENTS ARE TAXING US TO DEATH to help their own.
Wake up, Tax Slaves!
Yes. I left Communistfornia 5 years ago. A close lady friend who was some middle management bureaucrat in a minor department of CA was raking in a $90,000 pension plus totally free healthcare. I knew then the state was doomed, and I was doomed to suffer higher taxes on top pf the $8500 I normally paid every year.
It responded: “ Simplify the US tax code by removing redundancies and conflicts.”
We’re saved!