In the coming years, the IRS will no longer be just a tax collection agency; it is transforming into an advanced technology entity that will apply artificial intelligence and automation to detect errors, optimize audits, and provide more personalized services.

So, how will our relationship with the IRS change in the age of AI? Here's a brief explanation:

1. More audits...but smarter ones: The IRS is investing in technology to detect tax irregularities with AI algorithms that cross-reference information in real time. What does this mean?
   • Fewer random audits, more targeted and accurate audits
   • Automated analysis of 1099 forms, W-2s, cryptocurrencies, and app deposits (Venmo, Zelle, Cash App, etc.)
   • Prioritization for high-income taxpayers, large businesses, and repeat taxpayers
2. Enhanced taxpayer services with conversational AI: The IRS has already begun using AI-based virtual assistants to answer questions, schedule payments, and assist with filing. Therefore, more forms and processes will be available digitally and interactively. This is especially beneficial for self-filers and those who use digital platforms. Wait times on the phone will also be reduced.
3. More automatic cross-referencing of information: With the digitization of forms and collaboration with technology platforms, the IRS will be able to:
   • Detect unreported income from freelancers or content creators (YouTube, TikTok, OnlyFans, Substack, etc.)
   • Monitor rental income (Airbnb, Vrbo, Turo)
   • Track financial activity on cryptocurrency exchanges (Coinbase, Binance US)
4. Automatic tax returns: There is already talk of a pilot system for pre-filled tax returns for certain taxpayers with simple incomes. In other words, the IRS could send you a suggested return, and you'll just have to review and approve it. This is still under development, but it's a clear sign of where the system is headed.
5. Greater emphasis on security and anti-fraud: AI will also help detect tax phishing, fraudulent returns, and theft of refunds or false dependents. Facial authentication and digital verification will become increasingly common.

How to prepare?

• Keep your records up-to-date and digitalized
• Use modern accounting tools that generate clean reports
• Work with tax advisors who are up to date with the IRS's digital transformation
• Report all your income, even the "small" or sporadic income

In conclusion, IRS automation is not a threat to those who do things right. In fact, it can streamline processes, reduce errors, and offer more control to the informed taxpayer. But it also marks the end of "tax shortcuts" and informality.

If you need help with your tax return, My Accounting Now has a team of accounting specialists. Call us at 786-228-8689 or email us at info@myaccountingnow.com