Heads Up: IRS Boosts High Asset Tax Investigations with AI

IRS AINew budget and new tools mean the Internal Revenue Service (IRS) has the capability to pursue the true tax obligations of high-asset taxpayers and large business partnerships.


A long time in arriving, the IRS now has tools in hand to pursue high-wealth taxpayers who are carrying high debt to the IRS. In a lengthy release, the IRS described its blueprint to restore fairness to the tax system (read: reducing working class audit rates) and take a deep dive into individuals and entities with high wealth and complex portfolios (by increasing audit rates and investigating high earners, partnerships, and large enterprise).


It should come as no surprise that the IRS is earnestly shifting gears. The finally-funded agency has been on a hiring spree and now boasts approximately 90,000 full-time employees. In 2022, the IRS was just getting by with approximately 79,000 employees. In the last year, the rumor mill went wild with claims that the IRS was staffing up with armed agents to bust middle-class businesses and taxpayers, but the opposite is true. The IRS has literally ended its unannounced visits on regular audits. Plus, the majority of new agency hires are data scientists and those with wage and investment specialties who have been poached from accounting and law firms.


And to what end all the hiring? The IRS set forth key features of its forward plan, including:

  • Enforcement of Large Partnership Compliance: Using AI, the IRS is pairing data science with tax enforcement to pursue some of the most complex financial players in the market. Because the agency has been perpetually budget-strapped, audit goals were modest and aimed at lower-level fruit—oftentimes middle and lower-income workers whose tax situation could be relatively easily investigated. By the end of last month, the IRS planned to open 75 examinations, across industries, of the largest partnership entities in the U.S. It probably goes without saying that AI for tax enforcement purposes is going to be a game-changer.
  • Audit trends:  The IRS intends to “intensify” its efforts to audit taxpayers with income over $1 million who hold more than $250,000 in tax debt. The IRS plans to focus on high-wealth tax collection throughout 2024 and will begin with approximately 1,600 taxpayers who currently reside in this category.
  • Partnerships redux: The IRS is also targeting partnerships with balance sheet discrepancies that hold more than $10 million in assets. The bottom-line focus is on partnerships with balance sheet discrepancies, especially those with millions of dollars of difference between the end and beginning of the year statement balances.


We have discussed the possibility of a ramped up IRS and the implications for high-asset individuals and entities before. It looks like the future has arrived, with an AI chip on its shoulder.  If you have reason to believe your personal or corporate balance sheet is out of order—speak with an experienced tax attorney before you end up on the receiving end of a compliance letter.


Speak with experienced tax attorneys if you are facing an IRS audit or tax controversy

Serving local and international clients from offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC provides strong representation for those with compliance questions, employment tax disputes or concerns about a tax fraud investigation. Call 800-579-0997 or contact us online today.


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