The Internal Revenue Service’s Criminal Investigation Division (CID) is returning to its traditional priorities after being sidetracked last year and expanding it’s scope. It helped immigration enforcement efforts while leveraging artificial intelligence.
In a talk at the NYU Tax Controversy Forum, Jared Koopman, Chief of CID, stated the following…
“We got pulled into a lot of different activities last year,” said Koopman. “We were working on Title Eight immigration. We were doing literally feet in the street in Memphis and D.C., getting into a lot of large critical incidents, shootings. We have staff that were put in situations that we’re not typically used to… when you’re pulled into other things that take you away from your core mission of financial fraud and tax fraud in general, you’re going to lose a bit of that work.”
He admitted that he’d seen a decline in some of that work, but that’s changing. “Luckily for us, I think that is starting to smooth over in the sense of the work getting back to our core mission…We are kind of finalizing Title Eight work. We are supporting the role of safe streets, but it’s more around employment tax…”
About 60% of CID work now focuses on tax fraud, while also combating other forms of fraud. He noted that they identified about $10.5B in fraud last year, a 15% increase over the prior year. They also discovered about $4.5 billion in tax fraud, which was almost a 110% increase over the previous year.
“When folks think that we’re slowing down, or that things are not being addressed, especially in the tax arena specifically, that’s definitely not the case,” said Koopman.
“We’re actually seeing a lot more. We’re doing a lot more. We’re also seeing a huge amount of digital aspects, 2.35 petabytes of data.”
CID is dealing with advancing technological challenges in many of the cases it’s investigating. It brought in about $800 million in seized assets, with $100 million going back to victims of some of those crimes. Now CID is moving further into using artificial intelligence in its investigations while remaining wary of issues like AI hallucinations.
“We don’t use AI to go out to the internet, to be bringing stuff back and potentially having hallucinations, etc.,” he said. “And when we do that, we become more efficient in data analytics. We become more efficient in just the large data conceptually, and having context to how that’s affecting fraud trends, analysis patterns.”
He gave the example of the Automated Underreporting function for detecting signs of potential tax noncompliance. Instead of an employee sending out a notice and receiving a response and payment from the taxpayer, it’s now less of a manual process.
“That entire process is now automated 100% through AI,” said Koopman. “We have a 98% accuracy rate versus 92%, so we’ve gotten more accurate. We’ve eliminated the need for those employees to do that automated work. Now they can all be put on something else that’s more complex to interact with the taxpayer on something that’s a little bit more challenging.”
Koopman also said, “When we can start implementing this at scale, you can imagine the possibilities of where we can go as we start to build this out. It will take time, but it’s really advancing very quickly, and I think it should, because the criminals and abusive tax (schemes) are advancing just as fast.”
Let me leave you with this…
You should understand that there are three main types of IRS employees: Revenue Agents, Revenue Officers, and CID Officers. Revenue Agents conduct audits, and Revenue Officers collect money, but CID employees are completely different.
They’re well-educated, speak the Queen’s English, and carry Glock 19’s. These people are not to be messed with under any circumstances.
Originally, their focus was targeting major criminal organizations like drug cartels and the mafia, hence the Glocks. But now they are focused on anyone doing something wrong.
That could be you.
The IRS Underreporting System catches people who evade income tax. This is done in a couple of ways…
1 – By not claiming all of their income on either a business or personal income tax return. Let’s remember that through the use of 1099s and W-2s, they already have an idea of your income at both the business and personal levels.
2 – It also analyzes a taxpayer’s lifestyle and the money required to support it. In other words, if you own this house, a nice Mercedes, and have a couple of kids in a Montessori School, you need to make X to support your lifestyle.
And if you aren’t reporting that on an Income Tax Return and paying the appropriate tax, then you’re probably underreporting.
CID was legendary in our industry. We read about them and studied them, but most accountants would never meet them in their entire career. CID Officers worked out of offices so secret that their addresses were never even listed on IRS directories.
They were basically ghosts.
We all knew that if they contacted us about any of our clients, we were about to have a very bad day. Again, these are not your normal IRS employees.
They carry weapons, are trained to use them, have college degrees, and actually know how to make a journal entry.
I’m writing this so everyone understands that CID’s Mission has officially changed. There was a time when only major, nefarious criminals, needed to worry about meeting a CID Officer.
But that has changed. If they’re using AI and the IRS Underreporting System, they could be coming after you.
The person who handles your accounting and tax work is now more important than ever before. If they make a mistake, CID could knock on your door.
Trust me. That would be a very bad day.
If you’re having any difficulties with your accounting and tax work, please contact us today. I haven’t had one of my returns audited at the Federal Level in the past twelve years and most of my clients are perfect audit targets. Why not?
Because our work is so good that no one has any reason to audit it. Imagine sleeping soundly at night and contact us today.
We’re all going to get through this. Let’s get through it together…
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
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