July 2023

The Role of Artificial Intelligence in Tax Administration – Tax Lawyer Weighs In


In the article from taxnotes.com, “IRS Must Be Aware of Risks of AI Use, Tax Professionals Say” author Lauren Loricchio discusses the potential benefits of using artificial intelligence (AI) in tax administration, such as predicting taxpayer behavior, detecting irregularities, and improving efficiency. The article notes that tax professionals  and tax lawyers emphasize the importance of understanding and managing the risks associated with AI implementation. Concerns include the lack of necessary systems, skills, and investment in leveraging available data, as well as the potential for unintended consequences and biases in AI algorithms. Sideman & Bancroft tax lawyer commented on the article saying he “expects the IRS to invest some of its IRA funding in AI technology. But with the debt limit deal eliminating more than $20 billion of the agency’s supplemental funding, he said it’s unclear how that might affect planned technology upgrades.”

The IRS’s plan to enhance data analytics and invest in AI technology is highlighted, along with the need for thoughtful regulations and independent verification to ensure responsible use. Sideman & Bancroft tax lawyer said he “is in favor of technological upgrades needed to modernize the IRS, but would like to see thoughtfully considered regulations that limit the IRS’s use of AI and that help mitigate potential issues, like for instance racial bias.”

Partners Steven Katz and Jay Weill  lead the Tax Practice Group and handle all aspects of taxpayer controversies against the Internal Revenue Service, the California Franchise Tax Board, the California Department of Tax and Fee Administration, and the California State Board of Equalization, including audits, administrative appeals, and both routine and complex collection matters.

Full taxnotes article here.