Tuesday, March 3, 2020
Wall Street Journal, AI Comes to the Tax Code:
Governments are increasingly relying on machine learning and data analytics to analyze troves of data as they seek to detect tax evasion, respond to taxpayers’ questions and make themselves more efficient. ...
The Internal Revenue Service is designing machine-built graphs to plot the relationships among participants in business deals, giving auditors a new tool to analyze transactions and detect tax avoidance. The agency is using artificial intelligence to study notes that agency employees take when fielding questions from taxpayers and testing which combinations of formal notices and contacts are most likely to get a taxpayer who owes money to send a check.
The IRS scours data from inside and outside the agency for its compliance initiatives, such as a recent effort to identify thousands of high-income individuals who didn’t file returns. The government is now sending tax collectors to knock on their doors. ...
Real risks exist if algorithms for audit selection inadvertently discriminate against taxpayers by race or location. And relying on technology can make an already impersonal agency even more so, perhaps confusing taxpayers who may struggle to understand why the government is coming after them and want to deal directly with people at the IRS. “The tools are only going to be as good as the people employing them,” said Victor Fleischer, a UCI law professor.
Meanwhile, tax preparers and accounting firms are turning to the same tools to keep tax bills as small as possible. The big four accounting firms all have specialists trying to use artificial intelligence to guide the advice they give clients.