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IRS Working to Deploy AI Algorithms and Models

Posted on July 20, 2023

The IRS is working to introduce the use of artificial intelligence from an analytics perspective, according to an agency official.

Speaking July 19 during a webinar hosted by the Tax Executives Institute, Kaschit Pandya, IRS deputy chief information officer, said that right now, AI feels like what the cloud felt like 10 years ago.

“There’s a lot of buzz around the technology, the possibilities. But as we’ve learned over the course of the last decade, it can be misunderstood, it can be misapplied, and it can lead to negative results,” Pandya said.

Pandya said the IRS is working to find the right models and is going live with its early concepts later this year “and then building out more models over the course of next year.”

He said the agency is also looking to use AI algorithms and models in its digital transformation.

“We are actively working on implementing AI algorithms and models, so that not only can we scan the paper that’s coming in, we are [also] able to accurately extract the data,” Pandya said.

Pandya said that innovation is critical for the IRS. “We cannot fall behind what the industry is providing,” he said.

Data Warehouse

In its strategic operating plan for spending its additional funding from the Inflation Reduction Act (P.L. 117-169), the IRS says it wants to deliver “cutting-edge technology, data, and analytics to operate more effectively.” It calls for improving IRS systems by fiscal 2024 “to streamline access to individual taxpayer data for service and compliance purposes via secure, standardized” application programming interfaces.

Pandya said it is difficult to get access to meaningful data at the IRS right now, but that the agency’s enterprise data platform program is meant to make it easier.

“The idea is to take all of our data from within the IRS, place it in an enterprise data warehouse, and then build the analytics layer on top of it so that everyone has access to the data that they need in order to carry out an action or research something,” Pandya said. “I believe the data warehouse is what will probably provide the most benefit for the taxpayers and our business users.”

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