America's super-rich will become targets of AI surveillance

On September 15, 2023, the US Internal Revenue Service (IRS) officially announced the use of AI to prevent and combat criminal activities in the tax field.

The IRS said the new monitoring tools would focus primarily on wealthy individuals who appear to be engaged in "sophisticated tax evasion schemes," rather than burdening people with "unusual" audits.

AI-powered tools are expected to change the way the IRS conducts audits, focusing primarily on high-income taxpayers with gross incomes of $1 million or more, and identifying individuals with actual tax liabilities of more than $250,000.

The application of AI technology will “help IRS monitoring teams better detect tax fraud, identify emerging threats, and improve screening tools,” the Internal Revenue Service said in a press release.

The initial focus of the IRS will be to use AI analytics to replace existing electronic and paper reports. The current AI-powered Modernized Electronic File (MeF) system can already process 76% of paper tax returns without human intervention. In the next phase, the IRS will test and apply AI models to extract valuable information from these electronic files.

For those earning less than $400,000 a year, the IRS said it would ensure audit rates would not increase, and said the tax revenue collected would be used to support low-income workers.

The agency clarified that AI will be used to begin investigating 75 of the largest US partnerships with an average of over $10 billion in assets. The operation is said to target hedge funds, real estate investment partnerships and law firms that may have skirted the law, with a total of about 1,600 people “owing hundreds of millions of dollars in taxes.”

"New tools are helping us spot patterns and trends that were previously unseen, and as a result we have more confidence in where to look and where large partners are hiding income," US Internal Revenue Service Commissioner Daniel Werfel said at a press conference earlier.

In August 2023 alone, the US Internal Revenue Service hired a record number of full-time employees, the largest increase in more than a decade, to comprehensively improve its services and support new efforts to deploy AI tools to combat tax evasion.

The IRS's newly announced tax collection efforts are expected to begin full implementation as early as October 2023.

In a press release from the IRS, Daniel Werfel asserted that the agency is committed to targeting the wealthiest, arguing that the new AI tools will hold violators accountable for what they owe. “I am committed to the new funding that will go toward better compliance for the wealthy, while middle- and low-income taxpayers will see no change in IRS audits in the near term.”