The Internal Revenue Service (IRS) in the United States recently announced its use of artificial intelligence (AI) technology to target wealthy individuals who engage in tax evasion through partnership structures. However, there are concerns that the real intention might be to intimidate small business owners who utilize legal tax minimization strategies.
The messaging from the IRS seems to be deceptive and raises questions about the agency’s motives. It appears that entrepreneurs and small business owners are the actual targets. These individuals make up a significant portion of the population, but they lack the substantial resources to defend themselves in the face of audits or legal battles.
The IRS claims that its use of AI technology will be a powerful tool to ensure tax compliance among large hedge funds, real estate private equity partnerships, and law firms. However, the language used in the IRS press release is filled with buzzwords and lacks credibility. The suggestion that the AI tool can identify cheating in returns from highly sophisticated taxpayers who operate within strict regulatory frameworks seems far-fetched. These entities also have the means to mount a robust defense against the IRS.
In reality, the IRS seems to be targeting lower-end high earners, such as successful small business owners like dry cleaners, engineering firm founders, or owners of fast-food franchise outlets. These individuals may not have unlimited financial resources to defend themselves and can benefit from legitimate tax minimization strategies.
The IRS aims to scare taxpayers into submission by sending the message that their AI technology can detect any suspicious activity related to tax minimization. The agency conveys the idea that resistance is futile and that taxpayers should refrain from engaging in any tax planning activities, even if they are legal. The IRS wants to assert control over the ways taxpayers can minimize their tax obligations.
This recent action by the IRS is part of a consistent pattern where the agency seeks to limit taxpayers’ ability to reduce their tax liabilities. It is crucial for taxpayers to assemble a strong advisory team and seek their counsel before any problems arise. Additionally, taxpayers should voice their concerns to their elected representatives for any meaningful changes to occur.
In conclusion, the IRS’s use of AI technology to target wealthy tax evaders might in reality be an attempt to intimidate small business owners who rely on legal tax minimization strategies. This pattern of behavior by the IRS underscores the need for taxpayers to be proactive in seeking professional advice and advocating for changes in tax regulations.