IRS Deploys AI To Target Rich Partnerships (nytimes.com) 52
The Internal Revenue Service has started using artificial intelligence to investigate tax evasion at multibillion-dollar partnerships as it looks for ways to better police hedge funds, private equity groups, real estate investors and large law firms. From a report: The announcement on Friday demonstrated how a more muscular I.R.S. is using some of the $80 billion allocated through last year's Inflation Reduction Act to target the wealthiest Americans and tackle the kinds of cases that had become too complex and cumbersome for the beleaguered agency to handle. The agency's new funding is intended to help the I.R.S. raise more federal revenue by cracking down on tax cheats and others who use sophisticated accounting maneuvers to avoid paying what they owe. But the allocation has been politically contentious, with Republicans claiming that the I.R.S. will use the funding to harass small businesses and middle-class taxpayers.
Earlier this year, Republicans succeeded in clawing back $20 billion as part of an agreement to raise the nation's borrowing cap. That political fight has put the onus on Democrats and the Biden administration to show that the funding is primarily enabling the I.R.S. to target the rich. "These are complex cases for I.R.S. teams to unpack," Daniel Werfel, the I.R.S. commissioner, said in a briefing with reporters. "The I.R.S. has simply not had enough resources or staffing to address partnerships; in a real sense, we've been overwhelmed in this area for years."
Earlier this year, Republicans succeeded in clawing back $20 billion as part of an agreement to raise the nation's borrowing cap. That political fight has put the onus on Democrats and the Biden administration to show that the funding is primarily enabling the I.R.S. to target the rich. "These are complex cases for I.R.S. teams to unpack," Daniel Werfel, the I.R.S. commissioner, said in a briefing with reporters. "The I.R.S. has simply not had enough resources or staffing to address partnerships; in a real sense, we've been overwhelmed in this area for years."
this government computer can process over 9 return (Score:3)
Mr. Simpson, this government computer can process over 9 tax returns per day. Did you really think you could fool it
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You won't be seeing many prison moves where you're going... prison.
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Banker: Mr. Simpson, you're a dollar overdrawn.
Homer: GET HIM SHEEBA!
IRS is technologically backward (Score:3)
I understand that every organization wants to put out a press release about AI, but it's ironic that one of the most technologically backward organizations in the United States would talk about how they're going to start using AI. When I had to deal with the IRS a couple years ago, the only way they would communicate with me was via USPS mail. Perhaps they should start with technology like e-mail from the 1990s and then work their way up to more advanced stuff?
Re:IRS is technologically backward (Score:5, Informative)
That's a consequence by the decades of cuts and deliberate underfunding. Now with the funding increase the IRS is finally getting onboard with digitizing it's records:
IRS to eliminate ‘oceans’ of paper by digitizing all new tax returns by 2025 [federalnewsnetwork.com]
Re:IRS is technologically backward (Score:5, Insightful)
That's a consequence by the decades of cuts and deliberate underfunding
It's not just that. Consistently lawmakers are calling Commissioners into meetings to basically berate them for even remotely thinking of things to make tax enforcement better. The level of fingers Congress regularly puts into the IRS has developed a pretty paranoid mindset that can be felt in many of the various areas of the IRS. If there's a reason that the IRS seems all over the place it's because there exists a lot of people who want to dictate thing to the agency without having to do the whole "law making" thing that's hard to get passed.
Now with the funding increase the IRS is finally getting onboard with digitizing it's records
The funding will help, but a lot of folks in the IRS will believe it when they see it. Promised money has a way of being yanked away at the last minute because some lawmaker wanted to "Stand up to big Washington". The IRS is a really useful punching bag for a lot of lawmakers who want to look like they're getting things done to their voters.
It cannot be expressed enough, if everyone would just leave the IRS alone and allow them to do their job, we'd actually have a much better agency. But of course... Congress can't leave well enough alone.
Re:IRS is technologically backward (Score:4, Informative)
It does seem like it is helping in direct matters though. They got the money, the "yanking" was already done with Republicans slicing $20B off the initial $80B
IRS reduces phone wait times to 4 minutes, streamlines filing [nydailynews.com]
U.S. IRS to hire nearly 20,000 staff over two years with $80 billion in new funds [reuters.com]
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The motivations are probably spread around. Some just don't want IRS to find tax cheats, as that eats into their political donor base. Others want the IRS and other government agencies to fail outright so that they can be eliminated. Others think that paying taxes is immoral and that cheating on them is a patriotic duty.
Whatever the motivations... I think even only 20 years ago I don't think anyone could have predicted a congress that was actively trying to undermine the government and its duties.
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Others think that paying taxes is immoral and that cheating on them is a patriotic duty.
Ironically, many of these people are staunchly self-described patriots that purportedly worship the Constitution, including Article 1, Section 8, Clause 1 and strangely claim to support strict interpretations of the Constitution. Fortunately for them, they have realized that even strict interpretations of the Constitution are necessarily viewed through the pens of the judiciary, and therefore controlling the judiciary allows effectively molding the Constitution to whatever they wish.
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I would have thought that the IRS finding tax cheats would play right into their hands then, more anti-tax protesters.
Personally I'm fed up subsidizing small cash businesses that hide their income
Re:IRS is technologically backward (Score:5, Insightful)
Because email can't be scammed?
While it sounds archaic, there is a valid reason the IRS, and many other government agencies, do not communicate through email. While creating a fake envelope, letterhead, and documentation to mail can be done, that costs far more money, and time, than creating a fake email with a link for someone to click on if your intent is steal their money.
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I had to deal with the IRS recently, and I was actually positively surprised. After an initial lapse (likely caused by me calling the wrong number), the phone number my accountant provided got quick resolution to my issue over the phone.
Fraudulent refunds are a real issue for the IRS, and have been for a long time. This generally justifies their reticence to use standard technology and the complexity of impementing a secure system.
I do applaud them for using machine learning on reviewing these large enter
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Unfortunately, there's the question of how to handle a high error rate. Which current AIs are known for. It's probably something that domain-specific AIs can handle fairly readily, but trusting them ...
I'd prefer that the first AI applications be those where it's easy to tell whether they're wrong or not.
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Unfortunately, there's the question of how to handle a high error rate. Which current AIs are known for. It's probably something that domain-specific AIs can handle fairly readily, but trusting them ...
I'd prefer that the first AI applications be those where it's easy to tell whether they're wrong or not.
Most practical applications of AI use AI as part of the processing pipeline. Self-driving cars use AI modules for perception that can have 1-5% error rates, which at 30fps means an error every few seconds. The only reason that can work is that the AI output is then fed to other modules that make the actual decisions. Similarly for AI use by the IRS, using AI as the final decider is problematic, but using AI as a first step to flag returns that are then reviewed by a human or at least some rules-based exp
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In this particular case I doubt it is a significant issue. ML would presumably be used to track relationships between entities more than compliance with law for a single entity. I do some work for a small charitable foundation, and I do worry about them getting caught up if you try to directly correlate donations and receipts between organizations-- not because of fraud but because sometimes donations get applied to the wrong organization name (large foundations might have multiple 501c3 sub-entities, and
Policing (Score:5, Interesting)
Policing US tax law is complex because US tax law is complex. It's full of carve-outs, incentives, abatements, rebates and deferments because the IRS tries to tax absolutely every kind of economic activity, even if it doesn't make any sense to do so.
Simplify the tax code. Put as much tax burden as possible at the point of use. Make it easy to check and enforce.
Here's a Planet Money episode on the topic, where they ask a collection of economists from across the political spectrum how to fix the economy. Nearly all of them agreed, mainly, to get rid of a bunch of tax deductions and to move taxes around to be simpler:
https://www.npr.org/sections/m... [npr.org]
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How will politicians get campaign money if they can't sell carve outs in the tax code for their friends?
If we had a flat tax of some sort I wouldn't have felt the need to stuff my money into a trust to avoid shelling out over 50% on my income. Now the government gets dramatically less from me and won't see much of it until years after I'm dead. I would have preferred to pay something reasonable up front and be done with it. The only people who made out are the lawyers and cpas.
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Flat taxes are regressive but getting rid of most deductions would accomplish your goal as that's where a majority of the trickery happens.
A progressive tax system is good since marginal utility of money is a thing.
Re:Policing (Score:4, Interesting)
Paying 50% of my income is not ok. That isn't progressive. It is theft at the barrel of a gun.
Why is progressive taxation good? Why is regressive taxation bad?
And several flat tax systems I've seen proposed actually have 2 rates. 0 and x% (from some value X between 10-15%). So the poor would still not pay taxes just like now.
You want a regressive tax system? Europe's VAT system is highly regressive. I don't see anyone complaining that the poor are disproportionately impacted.
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You want a regressive tax system? Europe's VAT system is highly regressive. I don't see anyone complaining that the poor are disproportionately impacted.
VAT is essentially a sales tax. The IRS collects income taxes-which are a different thing. Either you are genuinely ignorant of these differences, or are pretending they don't exist. in either case you have demonstrated that your are not worth engaging with.
Also, if you are paying 50% in income taxes in the US, you are doing something wrong and should consult a professional.
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Taxes are taxes. It doesn't matter how they get your money. You could entirely replace income tax with a sales tax or vice versa. I'm sure you understand that.
California tax: 13%. Federal Tax: 38%. After you add in a few more % for SS, Medicare, etc you actually end up well over 50%.
And yes I paid a lot of money to professionals to find a way out. After stuffing most of it away in trusts, as I stated elsewhere, I still paid about a million last year. I am pretty sure I haven't and won't receive a mil
Re:Policing (Score:5, Insightful)
I haven't and won't receive a million dollars in government services
Liz Warren I think put this nicely, what the wealthy get isn't and shouldn't be measured in direct payouts:
I hear all this, you know, 'Well, this is class warfare, this is whatever.' No. There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.
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They pay taxes for all those things too.
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That's right, and by nature of being wealthy they have benefitted the most from the things that are, should and could only be funded from public services and taxation.
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You live in a country that enables you to earn enough to pay a million in taxes (assuming this is not just a shaggy dog story).
You get your value for money. Don't believe me? Try moving to the libertarian paradise of the Congo and see how rich you can become.
Re:Policing (Score:4, Insightful)
Paying 50% of my income is not ok.
According to what? You can't just say that, justify it.
If you are paying 50% in the USA that is combined with state and local and likely puts you into one of the top 2 brackets which which are 35 and 37% which means an income of over $230k.
Why is regressive taxation bad?
Because marginal utility of money is a thing. Everyone's first 30-50k or so is the most important since they need that to you know, live. Every dollar after that gets progressively less important.
And several flat tax systems I've seen proposed actually have 2 rates.
Then it's no longer a flat tax, we're just messing with the brackets.
If you want to shift tax burdens around you could propose something like consumption taxes or LVT but flat tax is the worst of both, you still end up regressive and you still are underfunded (which i know is the point underneath)
Europe's VAT system is highly regressive.
Not really, comes down to how you measure it. At it's worst in most methods it ends up lightly regressive which is often offset by the social and spending programs of those countries (funded by the taxes). I could accept a somewhat regressive tax system in the US if there were stronger welfare systems in place to make sure people are kept out of poverty and can move up the income ladder.
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Flat tax is often proposed to "simplify" taxes, which I think is a ruse to push the idea on people who don't think it through. The easiest part of taxes if figuring out the percentage. Having a fixed rate only makes taxes trivially simpler. Many flat tax advocates still want to keep those deductions or varying rates that help them out. The biggest pushes of the flat tax idea are rich enough that they don't do their own tax prep themselves, so simplicity of tax code isn't an issue for them.
Now start tryi
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According to what? You can't just say that, justify it.
If you are paying 50% in the USA that is combined with state and local and likely puts you into one of the top 2 brackets which which are 35 and 37% which means an income of over $230k.
I've read that analysis somewhere as well. Your nominal income tax might be around 35% on average, but if you add up *everything* you are taxed on, it comes out to around 50% for most people above the poverty line. Sales taxes, energy tax, property tax, taxes on investments, etc... Some are hidden, such as tariffs on nearly everything imported into the country. Before a gallon of gas goes into your tank it's taxed multiple times.
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Maybe, there are ways to calculate that but also things like sales tax, gas taxes are consumption taxes so the people paying are people using the services. Other countries use VAT which is functionally the same as all those, taxing products as they move through the economy.
Also OP I am almost positive was not talking about that tax burden but specifically income taxes which also the 50% concept may not be accurate because taxes in America are calculated marginally so even if they are in the top 37% bracket
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Much of Europe pays both VAT and income taxes. US taxes are a piddling amount in comparison. But the US bitches about taxes the most, because they get so little from the taxes whereas in Europe there's not nearly as much grumbling because they can see actual benefits.
casino and lotto wins should not be taxed for most (Score:1)
casino and lotto wins should not be taxed for most players like out side the usa.
Now in some places out side the usa professional gamblers do have to pay and file taxes.
Re:Policing (Score:5, Insightful)
I do agree with simplifying the tax code. But "It's full of carve-outs, incentives, abatements, rebates and deferments because the IRS tries to tax absolutely every kind of economic activity, " is very misleading.
The IRS does NOT write tax code. That is written by Congress and enforced by the IRS. So by default most all economic activity is being taxed. By design. Plus, all of the abatements, incentives, abatements, and deferments is Congress attempting to *exclude* a particular very specific economic activity from being taxed.
Being outraged is good - vote accordingly! - but please direct your ire to the correct villains.
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Being outraged is good - vote accordingly!
Thanks to the combined efforts of "Team Blue" and "Team Red," it is no longer possible to do this.
As always, I invite any evidence to the contrary and consider down-modding and name-calling as lack of evidence.
Re:Policing (Score:4, Interesting)
Most of the carve-outs there are to stimulate economic activity. You do have the fundamental issue that businesses are taxed on profits and individuals are taxed at similar (or higher) rates on revenue. Without changing that fundamental issue you are stuck with a need for complex deductions and credits.
Re:Policing (Score:5, Insightful)
Policing US tax law is complex because US tax law is complex. It's full of carve-outs, incentives, abatements, rebates and deferments because the IRS tries to tax absolutely every kind of economic activity, even if it doesn't make any sense to do so.
The opposite. It is full of carve-outs, incentives, abatements and referrals because the high-income stratum of our society has lobbied to put in those loopholes. They have accountants who can do the details; they don't care that the complexity adds to other peoples' paperwork burden.
Simplify the tax code.
Yep!!!
Put as much tax burden as possible at the point of use.
Uh, this would be a sales tax, but because of course if you buy materials for ten dollars and sell the product for fifteen, the tax code should only require income on the five dollar difference, the value added, so it becomes a value-added tax. And people lobby (with some reason) for zero sales tax on basics like food... but it's ok to have sales tax on luxury items, like expensive food. But how do you define luxury? Very quickly it can become as complex as income tax, but now the complexity is something that happens in a thousand transactions every year, not once a year.
It's an easy suggestion to make, but only pretends to solve the problem.
Make it easy to check and enforce. Here's a Planet Money episode on the topic, where they ask a collection of economists from across the political spectrum how to fix the economy. Nearly all of them agreed, mainly, to get rid of a bunch of tax deductions and to move taxes around to be simpler: https://www.npr.org/sections/m... [npr.org]
Yep. But every deduction has a constituency that will fight to keep it.
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Actually, the "taxing every kind of economic activity" is easy. The hard part is the exceptions.
Now some of this may be carve-outs to protect the rich. But there are also incentives. Ie, the goal of long term capital gains is to encourage investment and savings. But that became a sort of rich man's carve out to some people, because they feel that normal people don't have investments and only have a tiny check at the end of each week and nothing leftover at the end of the month.
A lot of people are just opp
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That's a terrible idea (Score:2)
Our tax code isn't all that complex for working Americans. You put a few values in and bob's your uncle your done. The carve outs are only for the 1%ers and we can make those go away by voting for better candidates in prima
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You assume that the purpose of the IRS and of collecting taxes in general is to fund the government, but that's not true anymore, is it? The government is only partially funded by the taxes, large part of the government expenses is borrowed and/or printed (well, the Treasury issues bonds, the Federal reserve issues new credit, they exchange), the reality is that the 40-50 billion dollars a month trade deficit proves that the money isn't coming from productivity, so not from taxes that actually are extracte
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Simplify the tax code. Put as much tax burden as possible at the point of use. Make it easy to check and enforce.
You had me until this line. The bold part is mutually exclusive on its face with the statements on either side. There are thousands upon thousands of points of use, plenty of which are only questionably so, so you're guaranteed to have massive complexity and difficulty with enforcement.
Also worth considering that use-based taxes can create vicious cycles that can drive people into poverty. As people are forced to spend more and more of their income on immediate needs (i.e. living paycheck to paycheck), they
Will the special IRS-CI AI agents be armed with gu (Score:1)
Imagine (Score:5, Insightful)
Imagine if they used these resources to:
1. Simplify the tax code.
2. Make proper tax planning available to everyone.
That's the problem with liberal political groups across the globe. Instead of trying to enrich everyone, they focus on making everyone equally poor. Except the government, that is...
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Imagine if they used these resources to:
1. Simplify the tax code.
The IRS can't use any resources to do that, congress writes the laws. And congresscritters are bought by campaign donors to make sure that it's a complicated system that they can benefit from. A good use of that $20B which was clawed back would be to use it to fund political campaigns and re-classify campaign donations as the bribes they really are. But, that would take a constitutional amendment to make it clear that bribes aren't protected free speech. And, the very people who benefit from this money
the point that confuses me is.... (Score:5, Interesting)
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The CBO has actually run the numbers on this, and agrees with you. That's why this part of the legislation had such a large revenue potential: the IRS should finally be able to get 10% of Romney instead of 10% of you. Currently, the IRS has so little resources, that the only cases they can afford to investigate are the really easy ones where you or I get audited, because they're simple and we can't afford to hire lawyers to fight it.
The proposed changes are to provide the resources to deal with the comple
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"In a letter response Commissioner Rettig blamed a decade-long decline in the the IRS enforcement budget for the steep drop in audits of high-income taxpayers relative to EITC taxpayers. According to Rettig, budget constraints have made it difficult for the IRS to hire and retain higher-graded, experienced examiners typically assigned to audit high-income taxpayers. Moreover, he explained, the IRS cannot simply shift lower-graded examiners to audit the more complex tax returns of the wealthy because such em