The Internal Revenue Service (IRS) this month is set to audit 75 major partnerships, including leading hedge funds and real estate companies. The selected entities, which have an average of $10 billion in assets, were identified with the assistance of artificial intelligence (AI) tools, allowing the IRS to discern patterns and trends previously undetected.
Commissioner Danny Werfel highlighted the agency’s past challenges, saying, “We’ve been overwhelmed in this area for years.”
The newly implemented AI tools aim to level the playing field, according to The Wall Street Journal, which initially reported on the topic.
The hedge funds and organizations will receive formal notice of the IRS audit in the coming weeks, Wall Street Journal said.
Last year, with Democrats at the helm, the IRS secured $80 billion from Congress, intended to enhance enforcement, technology and taxpayer services. But as political winds shifted, the Biden administration, under pressure, reclaimed more than $20 billion during debt ceiling negotiations.
Although the majority of the allocation was earmarked for enforcement, the IRS prioritized taxpayer services, including addressing three million more taxpayer queries during the recent tax filing season compared to 2022.
An inspector general’s report showed the IRS’s enforcement hiring lagged, with a net loss of revenue agents in the first half of fiscal 2023, the Wall Street Journal reported.
Looking ahead, the IRS intends to widen its audit net to encompass cryptocurrency owners and construction contractors affiliated with shell companies. There’s also a strategy in place to escalate collection efforts from high-earning individuals with tax dues.
Still, the IRS’s financial future seems uncertain, as congressional proposals hint at potential budget constraints, threatening the agency’s long-term plans. Commissioner Werfel expressed some concern, cautioning that if the cuts materialize, the IRS might only have enough resources to “Keep the lights on next year.”