With the rapid development of artificial intelligence (AI) technology, the Internal Revenue Service (IRS) in the United States has also initiated digital transformation and audit upgrades. Senior accountant Kevin Yeh recently stated in an interview that AI has evolved from being an auxiliary data organizing tool to an active filtering and risk assessment system, leading to a structural shift in the tax filing environment. In the face of the upgrading audit mechanisms and the trend towards transparency of overseas assets, taxpayers must adjust their mindset and practices to meet the challenges of the new era.
Kevin Yeh, the founder and CEO of the Asian American Accountants Research and Development Foundation, and former president of the North American Chinese Accountants Association, pointed out that the IRS has been undergoing significant changes in its manpower structure in recent years, with approximately 40% of employees retiring or leaving the agency, resulting in a reduction in manpower. As a result, the government has shifted its audit focus from “manual auditing” to “data algorithm screening”.
AI systems can simultaneously cross-reference tax data, bank information, reports from overseas financial institutions, and third-party declaration forms to accurately identify discrepancies.
Currently, high-risk audit items include:
– Incomplete reporting of cryptocurrency transactions;
– Failure to report foreign accounts (FBAR);
– Inadequate disclosure of foreign assets (Form 8938);
– Situations where individuals have high assets but report low income.
Kevin Yeh reminded that AI audits are not about “automatic penalties,” but rather prioritizing targets based on risk models. However, once listed in the high-risk category, subsequent audits will be more precise and swift. Therefore, taxpayers should ensure that all income, assets, and financial transaction records are complete and consistent to avoid unnecessary risks caused by data discrepancies.
With the increase in tax refund fraud cases and a rise in identity theft incidents related to tax filing, Kevin Yeh strongly recommends that all taxpayers proactively apply for an “Identity Protection Personal Identification Number” (IP PIN) from the IRS.
The IP PIN is a six-digit verification code issued by the IRS annually, which must be entered when filing taxes to prevent others from using your identity to file taxes and claim refunds fraudulently.
The application method involves setting up an IRS online account, completing identity verification, and obtaining a new IP PIN every January. Kevin Yeh emphasized that even if one has not experienced fraud, it is important to proactively safeguard against it, as identity theft often occurs without warning.
In recent years, the IRS has been actively promoting electronic filing (E-File), direct deposit for refunds, and online inquiry systems, leading to a gradual reduction in paper refund checks.
Kevin Yeh pointed out that future tax filing will heavily rely on online platforms, and he recommends taxpayers establish an “IRS personal online account” and a “state tax bureau account” (such as California FTB) as soon as possible.
Through online systems, taxpayers can instantly access tax records, outstanding balances, refund statuses, and historical data, which helps minimize communication delays and administrative errors.
Discussing the tax risk focuses in 2026, Kevin Yeh highlighted that reporting foreign accounts and assets remains a critical oversight area for the IRS. The IRS recently sought public opinion on the overseas reporting system, and there is market anticipation that a new Voluntary Disclosure Program may be introduced.
According to current regulations, failure to report overseas accounts intentionally can result in fines up to 50% of the account balance, with severe cases potentially involving criminal charges.
However, Kevin Yeh clarified that claims circulating online about definitely facing imprisonment or having half of the assets seized are often exaggerated. In practice, criminal liability usually occurs in cases involving large sums and prolonged intentional evasion, with most cases falling within the realm of civil fines.
He advised that if one has previously failed to report overseas accounts, seeking advice from a professional accountant or tax lawyer early on and voluntarily disclosing the information can significantly reduce criminal risks and prevent greater obstacles in future inheritance or asset planning.
Kevin Yeh emphasized that AI audits represent efficiency enhancements and transparency, rather than indiscriminate penalties. Taxpayers should transition from being reactive to being proactive with compliance, including maintaining comprehensive financial records, utilizing electronic filing systems effectively, enhancing identity protection, and regularly reviewing the status of foreign asset reporting.
“In the era of AI, data does not disappear, it is only matched more quickly,” he noted. Only by honestly reporting and planning ahead can individuals navigate through each tax season smoothly in the rapidly evolving tax environment driven by technology.