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Should computers decide who gets audited?

On Behalf of | Jun 9, 2021 | Tax Law |

The last two decades have seen amazing advances in technology and computer science. With machine learning and artificial intelligence leading the way, many tasks can be reliably assigned to computer programs to complete with only a small amount of human oversight. The problem, though, is that some companies might be too overzealous in adapting active learning to their critical business systems.

The Internal Revenue Service (IRS) has decided to approach this new wave of artificial intelligence (AI) with enthusiasm. Facing significant employee attrition each year and an immense tax gap, the IRS plans to mine data from sources such as tax returns, bank reports and, potentially, social media accounts. This information will be funneled through their AI to help determine who should be audited for compliance. In essence, with a tighter grip on resources, the IRS will have to work smarter in selecting which cases to audit with an eye toward proceeding with those that will likely conclude in their favor.

Is this fair for those filing?

While this AI system might be capable of detecting fraudulent returns, it is also capable of flagging the wrong people. Machine learning can make mistakes and misinterpret vague data. Depending on where the analytics are weighted, the system might generate a false positive based on exaggerated social media postings or unusual bank account transfers. Ultimately, it is up to the IRS to weed out the returns that were flagged as suspicious.

When facing an IRS investigation or audit, it is wise to seek the guidance of an experienced tax law attorney. In these complex matters, a simple misstep can lead to catastrophic results and devastating consequences. It is crucial that you act quickly to protect yourself.

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