Published on: August 2, 2018 Last modified: June 5, 2019

IRS Tax Audits & Artificial Intelligence

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    How Artificial Intelligence Affects IRS Tax Audits

    Gone are the days of the stereotypical CPA – visor, glasses, hunched over an adding machine with a stack of documents close at hand.

    For decades, people have been using computers and increasingly sophisticated programs to aid in tax preparation, risk analysis and auditing.

    Now, emerging technologies such as artificial intelligence (AI), machine learning and cognitive computing are taking over.

    Will the IRS soon be using computer AI in identifying who gets audited?

    How do you defend yourself against an algorithm?

    A recent Bloomberg piece highlighted the money and attention being devoted to this new technology with the Big Four accounting firms funneling cash into machine learning.

    • KPMG LLP, for example, has announced a partnership with IBM to utilize their “Watson” AI technology.
    • Deloitte LLP, similarly, has announced a partnership with Kira Inc., according to press releases from the individual companies.
    • MindBridge Ai Auditor is a platform that launched in February 2017. It now gives smaller organizations access to the same type of cognitive computing software. The program can quickly analyze thousands of transactions to identify suspicious behavior or provide a risk assessment.

    With numerous companies increasing their reliance on artificial intelligence, can the IRS be far behind?

    While the IRS has recently started aggressively examining AI in terms of cybersecurity, it remains unclear whether they will make the move to computer-driven audits.

    They seek a solution that can continuously learn, provide real-time monitoring of cyber threats across networks and process data across a range of IT sources and devices. However, their willingness to turn tax audits over to a machine has not been stated.

    If you are facing an IRS tax audit – computer generated or not – it is wise to seek the advice and guidance of a proven tax law firm.

    Do not hesitate to discuss your situation.

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