Artificial Intelligence and the IRS: Bridging the Tax Gap
The Internal Revenue Service (IRS) faces a persistent challenge with the tax gap, which is the difference between taxes owed by taxpayers and taxes actually collected. Artificial Intelligence (AI) presents innovative solutions that may assist the IRS in identifying discrepancies and ensuring compliance. By analyzing data patterns and predicting non-compliance, AI technologies can streamline operations and enhance the agency’s efficiency in tax collection.
The use of AI extends beyond mere collection; it can also play a pivotal role in optimizing the allocation of resources and streamlining communication between offices, especially in densely populated areas where a quick search for IRS locations near me reveals several branches. This strategic deployment of AI can greatly reduce the time and manpower needed for audits and investigations by highlighting areas of highest non-compliance.
One of the critical forms affected by this advancement is Form 5472, which requires foreign-owned U.S. corporations to report certain transactions. AI can automate the scrutiny of these forms, identifying inconsistencies and errors, and thereby supporting the IRS’s efforts to close the tax gap more efficiently.
As the IRS adopts AI, it not only aims to close the tax gap but also to enhance taxpayer services by predicting and addressing challenges proactively. This integration shows promise in handling vast amounts of data and providing insights that were previously difficult to obtain, thus heralding a new era for tax administration.