The Internal Revenue Service (IRS) is turning to artificial intelligence (AI) to help select tax returns for audits, aiming to narrow the tax gap. A recent Government Accountability Office (GAO) report emphasizes the need for consistent and transparent use of this technology. The IRS is piloting AI models to improve the efficiency and selection of audit cases for its National Research Program (NRP). However, the agency has not fully documented key components and technical specifications of these models, which the GAO recommends addressing to ensure clear communication and assessment.
The IRS recently announced plans to increase audits of large corporations, partnerships, and wealthy individuals using funding from the Inflation Reduction Act. However, the GAO points out that the IRS's strategic operating plan is not clearly linked to tax gap data and does not address sole proprietor noncompliance, a significant area of tax noncompliance. The GAO recommends that the IRS link its compliance strategies with NRP data to effectively allocate enforcement resources.