The Internal Revenue Service is often the bane of working men and women, especially during this time of year. If you own your own business or ticked the wrong withholding box, you may be on the hook for hundreds or thousands of dollars in April. But in a matter of less than a decade, the IRS will become turbocharged and your chance of an audit (or penalty) will be much, much higher. Rapidly advancing technology and an IRS ahead of the curve in artificial intelligence could mean the start of a closely-monitored and heavily enforced surveillance state.
The IRS will undergo a computing revolution in the next decade, as will all of the federal government. The implementation of artificial intelligence will bring changes to government record-keeping greater than the advent of the internet. And since most of the work will be done autonomously by software that doesn’t need breaks, take holidays or have human sympathies, the prospects for taxpayers are grim. After all, the argument will go, why wouldn’t you want more exact tax enforcement? Major tax cheats who offshore their funds in secret accounts wouldn’t be able to keep them any longer. But the technology will be applied to everyone, and soon the IRS will be able to see if someone slipped you $50 to help a friend of a friend move. This information could be used to automatically send penalties, warnings and audit notices. Once the tech is in place and operational, you’ll wish for the old IRS back.
The means for such enforcement will likely come in two main thrusts. The first is the creation of a Digital Dollar, which will have the ability to record almost all transactions and provide tremendous power to an already-mighty Federal Reserve. The second would be the use of powerful artificial intelligence that can parse through millions of transactions instantly. AI can already create music, photos and rudimentary video. Its current growth is exponential, and large companies and the federal government are taking note. Microsoft is likely to stake a $10 billion investment in text AI. The federal government already uses the technology for a myriad of reasons — and the one that will likely affect you the soonest is at the IRS.
The IRS is already using machine learning. Last June, it announced that AI would assist the agency in handling phone calls from the general public. This includes the ability for the AI to interact with the customer and, in the words of Deputy Commissioner Darren Guillot, “using artificial intelligence to access their account and resolve it, in certain situations, without any wait on hold.” The IRS signed a $70 million contract for AI to improve public interactions. It planned (but dropped, for now) a facial recognition program. The more tools the federal government brings online to digitally stalk Americans, the more it will be misused and abused.
Unbeknownst to many, some of the biggest actions are already baked into the cake. In 2018, the IRS inked a $99 million contract for advanced AI to crack down on tax evasion. The company it’s contracting with already knows a lot about you, even if you don’t know a lot about you. This company, Palantir, has incredible access to your personal records and actions. This includes text messages and criminal histories. The technology will enable both monitoring of transactions and physical location, but also the ability to compare a taken tax deduction to social media posts. The implications go well beyond comparing your W2 to your tax filing. The IRS stated in 2018 that it plans to use its AI monitoring of social media only for “previously identified tax compliance cases,” but the government doesn’t shrink once it has an appetite. One member of Congress called it the “ultimate auditor.”
Efforts to stop the ballooning power of the tax collectors have been unsuccessful so far. In December, the IRS announced a delay to its $600 reporting requirement that infuriated the public. But like most government policies, it will receive a new coat of paint and come back in some uglier, yet sweeter-named form soon enough. Ironically, the new Republican House of Representatives’ move to cut funding for the IRS may be what helps the agency to become more dangerous. The bill won’t make it past the Senate, and the $71.5 billion in new IRS funding and the hiring of tens of thousands of agents will go on unimpeded. However, the risk of serious budgetary and personnel cutbacks may help foster the next iteration of the government’s most hated bureau. Unless the GOP can figure out a way to repeal the agency — and there’s a bill trying to do just that, as unlikely as it is to ever pass — the next decade will bring serious changes to the government’s ability to monitor your personal financial life.
Soon AI could be making more decisions in the IRS than actual people. While tax cheats will be much more likely to be caught, the IRS audits the poor at a rate of five times that of the rich. The average taxpayer should be careful what they wish for. The positive news is that with the new, more efficient AI chatbots, you can get your audit notice and decision in the blink of an eye.
Kristin Tate is a libertarian writer and an analyst for Young Americans for Liberty. She is an author whose latest book is “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.