Speak with our experts

Schedule a free consultation with our team of experts!
Book a Call
IRS

IRS Seeks Outside Help with Identifying Errors During Filing

IRS News Tax Updates
Darren Guillot
Darren Guillot
National Director
Former IRS Commissioner of the Small Business/Self Employed Division
Irs Seeks Outside Help With Identifying Errors During Filing

The IRS is searching for contractors to support its plans to catch errors on tax returns when they are initially filed to avoid the need to fix them later — potentially with help from artificial intelligence.

In a request for information (RFI) published December 22, 2023, the IRS said it is looking for outside help with meeting goals laid out in initiative 2.1 of its strategic operating plan, a roadmap for spending its funding from the Inflation Reduction Act.

As part of that initiative, the IRS wants to notify taxpayers and tax professionals about potential issues when a return is filed to minimize the need to fix errors after filing. The plan says the IRS will “also offer real-time checks and notifications to help taxpayers claim any credits or deductions for which they may be eligible but have missed on their returns.”

The RFI is seeking responses from contractors who can help the IRS detect scams and schemes when returns are filed, including by matching “tax returns against prior year returns and tax account information to reject returns with indicators consistent with known scams/schemes” and by using “AI-based anomaly detection to detect taxpayer and tax preparer behavior patterns indicating victimization by and/or participation in a tax scam or scheme.”

The IRS noted that the purpose of the RFI is to gather information for project planning and that it isn’t a solicitation for proposals.

Noting that it appears that the IRS is looking to apply AI to examine and detect issues with tax filings, Harry Foxwell of George Mason University’s College of Engineering and Computing, told Tax Notes, “We can do that kind of thing today because the technology is up to the task, and this is a perfect area for applying that.”

“Tax returns are becoming very complicated, and I think they need automation rather than people to do some of these things,” continued Foxwell, who was previously a technical consultant for Oracle Corp.

A Game Changer

Darren Guillot of alliantgroup LP called the RFI “a necessary first step to get the best minds inside and outside of government to come up with the best solution.”

Guillot, who recently retired from the IRS as head of collections and operations support in the Small Business/Self-Employed Division, told Tax Notes that using AI to catch errors on tax returns sooner has been a priority for the IRS for some time and that funds from the IRA are a “game changer.”

“This is a big, positive move . . . and I’m glad to see that it’s moving forward,” Guillot said.

When the IRS was brainstorming the initiative in the recent past, Guillot said, the thinking was along the lines of “what if while a taxpayer is in the process of filing electronically, or before we finished processing their tax return, our systems could detect [that] something’s questionable on that return and then bounce it back to that taxpayer and give them a choice: Do you really want to leave this on this line? Do you want to make a change before we do final processing?”

It’s smart tax administration to prioritize resources for audits and examination activity when there’s an effort not to comply, according to Guillot.

Taxpayers who correct issues on their returns reduce demands on the IRS and its systems, which could help decrease the no-change rate for audits, Guillot explained. “It’s going to generate more revenue at less cost to the government, and it’s going to help the IRS to pursue more egregious contributors to the tax gap,” he said.

As an alliantgroup trusted tax advisor and consultant, Mr. Guillot helps small and medium-sized businesses navigate America’s tax system to secure incentives and credits that stimulate innovation and improve products and services. He also serves them as an expert resource resolving complex compliance and appellate controversies.
Darren Guillot
Darren Guillot
National Director; Former IRS Commissioner of the Small Business/Self Employed Division

News & Insights

View insights hub
News & Events Press Release

The SETI Institute announced that alliant Global CEO, Dhaval Jadav, joined its Board of Directors. Dhaval brings a deep lifelong passion for space science, a strong commitment to STEM education, and a shared belief in the SETI Institute’s mission to explore one of humanity’s most profound questions: Are we alone in the universe?

Speak with our experts

Schedule a free consultation with our team of experts!