AI as ‘ultimate auditor?’ Congress praises IRS’ adoption of emerging tech

For every dollar invested in the Internal Revenue Service, the agency collects an average $5 in revenue, making it “one of the best investments in the federal government,” according to the Treasury Department’s fiscal 2021 budget justification.

But the Treasury Department has also advised Congress that every dollar invested in enforcement “requires a funding increase in operations support for technology and administrative costs.”

Despite a decade of cuts to the IRS budget and workforce, members of the House Ways and Means Committee gave bipartisan support to President Donald Trump’s budget request to give the agency a $12 billion total budget for fiscal 2021.

That budget request would add another half-billion dollars to its current $11.5 billion budget, but those levels remain a far cry from the $14 billion budget the agency had in 2010.


The FY 2021 budget request would give the IRS, now in the third year of a six-year IT modernization effort, $300 million through the end of fiscal 2022. Congress already gave the IRS $180 million in the 2020 spending bill.

The budget would also boost the IRS’ operations support staff to more than 12,000 employees, an increase of more than 1,400 employees compared to 2019 levels. Those employees handle IT and cybersecurity issues, financial management, physical infrastructure and more.

That funding boost would support initiatives such as modernizing legacy IT systems and the Individual Master File, the engine behind the millions of income tax returns that will be filed over the next few months.

Read more: Budget News

But meanwhile, IRS Commissioner Chuck Rettig said the agency has found success leveraging artificial intelligence to target high-income households that have not filed their tax returns.

The Wall Street Journal has reported that the IRS’ criminal investigations unit now uses tools from the data-mining firm Palantir Technologies to flag potential cases for its officials to investigate.

Rep. David Schweikert (R-Ariz.) praised the agency’s use of this technology to improve enforcement and called AI the “ultimate auditor.”

But in order to move forward in this direction, Treasury Secretary Steve Mnuchin told members at a hearing Tuesday that continued investment in the IRS’s IT modernization remains critical to “bring the IRS into the modern world.”

Further implementation of AI at the IRS, he added, could lead to households claiming Earned Income Tax credit receiving their tax returns sooner.

 “We continue to bring the IRS into the 21st century by updating systems using better analytics and other technology,” Mnuchin said.

Read more: Technology News

Meanwhile, Mnuchin said the IRS remains focused on improving taxpayer experience by reducing call wait times and enhancing its online capabilities.

Treasury’s FY 2021 budget justification also highlights the IRS’ rollout of a new callback feature for its tax-help hotlines. According to the justification, 77% of taxpayers who called the hotline opted to have the IRS call them back instead of staying on the line.

Treasury has requested more funding from Congress to continue the development of more callback functions, with the goal of substantially increasing callback options by 2024.

Mnucin said the IRS continues to conduct surveys and interviews with taxpayers to assess these new callback functions, but said they generally have improved the agency’s taxpayer experience.

“I find it completely unacceptable the taxpayer should have to wait this long on a phone call and [they] should be able to expect to have a convenient, scheduled time to speak to an IRS representative,” Mnuchin said.

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