IRS expanding use of chatbots for taxpayers inquiries

Artificial Intelligence (AI) is thundering down the development track like race drivers at the Daytona 500 seeing the green flag waving, and the Internal Revenue Service is expanding its AI use to respond to taxpayer inquiries.

A chatbot is a computer program that simulates a human interaction or conversation. There are various types of chatbots. The one stimulating the most interest – or concern – is the AI-based chatbot, which uses Natural Language Processing to engage with human beings. IBM says that “NLP combines computational linguistics—rule-based modeling of human language—with statistical, machine learning, and deep learning models.”

IBM also paints a pleasant picture of our AI future:

“Modern AI chatbots now use natural language understanding (NLU) to discern the meaning of open-ended user input, overcoming anything from typos to translation issues. Advanced AI tools then map that meaning to the specific “intent” the user wants the chatbot to act upon, and use conversational AI to formulate an appropriate response. These AI technologies leverage both machine learning and deep learning—different elements of AI, with some nuanced differences—to develop an increasingly granular knowledge base of questions and responses informed by user interactions. This sophistication, drawing upon recent advancements in large language models (LLMs), has led to increased customer satisfaction and more versatile chatbot applications.”

What that means, simply put, is that it can “learn.”

The IRS says it is increasing its use of chatbot technology to answer “basic” questions, for people who’ve received notices of tax reporting discrepancies which may have resulted in underreporting their taxes.

“The new chatbot feature will assist taxpayers who receive notices CP2000, CP2501 and CP3219A. These mailings inform taxpayers if the tax information the IRS received from third parties doesn't match the information they provided themselves to the IRS,” the agency says.

The notices each are methods by which payments can be made to the IRS.

Figuring out why the IRS is embracing this technology isn’t complicated: it saves money and reduces reliance on real-life employees: the IRS has been saying for years that it doesn’t have enough of either one. If a computer program can do the job, added advantages to the IRS is that it doesn’t need salary, sick days, vacation days, retirement savings, health insurance, or any of the other human-related costs.

Among the questions the IRS’s AI system will answer for taxpayers whose returns are being scrutinized are:

  • What to do if they received a notice.
  • What to do if they need more time to respond to a notice.
  • How to find out if the IRS received their response.

The IRS says it plans to “continue additional bot technology features in the future to assist taxpayers with more complex issues.”

Developments such as these have raised the antennae of some of the people who work in the field who suggest that the high-octane effort (not only at the IRS) to use newer and more powerful AI systems is taking where no one has gone before – and that care should be taken.

Tech Policy Press in Feb. 2023 published an article titled, “Ten Legal and Business Risks of Chatbots and Generative AI.” The article issues this cautionary warning:

“Government, business and society can take the early learnings from the explosive popularity of generative AI to develop guardrails to protect against their worst behavior and use cases before this technology pervades all facets of commerce.”

The 10 risks it lists are:

  1. Contract.
  2. Cybersecurity.
  3. Data privacy.
  4. Deceptive trade practices.
  5. Discrimination.
  6. Disinformation.
  7. Ethical.
  8. Government contract.
  9. Intellectual property.
  10. Validation (validating AI responses).

The fact is that in the future, taxpayers contacting the IRS will be interacting more frequently with AI. Everywhere, not only with the IRS. Like a car at Daytona, the only thing happening on the AI front is that the pedal is to the metal.


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