IRS Backlog, AI in Finance, and STEM and R&D Jobs
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Tax Policy/News:
June 11: 5 IRS developments to watch
Following the conclusion of tax season, the IRS is implementing new policy updates and addressing a data breach involving former contractor Charles Littlejohn, who illegally copied and shared taxpayer information, impacting many.
This breach has caused significant concerns regarding data security and delayed notifications to the affected taxpayers.
Meanwhile, the IRS is making the Direct File system, a free tax filing option tested during a pilot program, a permanent service after positive feedback from users and stakeholders, including over 100 members of Congress.
Additionally, the IRS plans to expand this service to more states and tax situations, aiming to simplify tax filing and enhance taxpayer experience.
The agency is also recovering from a data breach and has introduced new policies such as reduced fees for Preparer Tax Identification Numbers and adjustments to health savings accounts for inflation, alongside updating its strategic operating plan to improve services and technology with the help of Inflation Reduction Act funding.
June 7: IRS backlog grows from tax adjustments
The Internal Revenue Service (IRS) has successfully reduced its backlog of unprocessed original tax returns but is struggling with a significant increase in unprocessed documentation for tax adjustments, which has grown by 241% since May 2020.
According to a report by the Treasury Inspector General for Tax Administration (TIGTA), over 2.6 million source documents need to be linked with the corresponding Form 5147 to facilitate retrieval from storage.
The IRS lacks a comprehensive strategy to address this backlog, and inaccuracies in inventory reports and mismanagement in document transshipment have compounded the problem.
Despite these challenges, the IRS is taking steps to modernize and improve efficiency, such as reassigning staff and utilizing technologies like the Document Upload Tool, funded by the Inflation Reduction Act, to reduce reliance on paper processes.
The IRS has agreed to implement recommendations from TIGTA, including a complete inventory of adjustment source documents and ensuring proper order in shipments to the Federal Records Center.
June 5: Document Upload Tool reaches key milestone; 1 million submissions received
The Internal Revenue Service (IRS) has achieved a significant milestone in its ongoing digital transformation by recording the one millionth submission through its Document Upload Tool (DUT).
Launched in 2021 and expanded in 2023 with funding from the Inflation Reduction Act, the DUT allows taxpayers and tax professionals to digitally respond to IRS notices by uploading documents directly on IRS.gov.
This tool, part of the IRS's effort to become a virtually paperless agency, has doubled its monthly use annually, indicating increasing taxpayer preference for digital submissions over traditional mail.
The IRS anticipates that this shift towards digital submissions could potentially replace up to 125 million paper documents annually, significantly easing the paperwork burden.
The leadership team behind the DUT's expansion is a finalist for the 2024 Samuel J. Heyman Service to America Medals, recognizing their contribution to public service.
June 5: Legislation, Outreach Could Help Tribal Taxpayers Access Tax Credits
Aubin Fefley and Ellie Pakzad, law students from the University of Washington, ventured to rural Alaska to assist Native Alaskans with tax preparation, focusing on unique tax situations and potential deductions for low-income taxpayers.
They joined other students in a program partnered with the Alaska Business Development Center to provide essential tax services and navigate complex issues such as nontraditional family structures and proving eligibility for tax credits like the EITC and child tax credit.
This initiative reflects broader challenges that Native American taxpayers face, including inadequate mail services and difficulties accessing necessary documents, which often complicate tax preparation and lead to unclaimed benefits.
The program highlights the need for legislative changes to better accommodate the diverse family dynamics and specific needs of Native American communities in tax preparation and financial support systems.
Economic News/Policy:
June 10: White House hits GOP over reported corporate tax cut preparations
The White House has strongly criticized Republican plans to extend and enhance tax cuts initiated during the Trump administration, should they regain control of the government.
Deputy Press Secretary Andrew Bates highlighted this strategy as a stark contrast to President Biden's efforts to rebuild the middle class, accusing Republicans of advocating policies that favor the wealthy, such as additional corporate tax breaks and tariffs, which could exacerbate inflation and national debt.
The GOP aims to fast-track these tax cuts using the budget reconciliation process, allowing them to bypass the need for bipartisan support.
Meanwhile, despite the Biden administration's achievements in reducing unemployment and gradually lowering inflation rates, public sentiment expressed in recent polls indicates a greater trust in former President Trump's handling of the economy and inflation issues.
June 5: Where America’s STEM and R&D jobs are and what pays the most
Despite recent layoffs in the tech sector, the STEM job market in the U.S. remains robust, as highlighted by an analysis of over 5,000 job openings which show a strong demand for STEM and R&D talents.
Geographic clustering around major research hubs such as Boston, San Francisco, San Diego, New York, and Chicago continues, reflecting their rich educational and industrial ecosystems. The Bureau of Labor Statistics anticipates a nearly 11% growth in STEM jobs by 2032.
While remote work has become popular, the analysis reveals that top-paying roles still predominantly exist in traditional hubs, with positions like "Head of Research" and "Director of Software R&D" commanding salaries upwards of $450,000.
Furthermore, despite the shift to remote work arrangements post-COVID-19, sectors such as data science and clinical research show a higher adaptability to remote formats, indicating a sustained trend toward more flexible work environments in certain STEM fields.
Technology:
June 6: Yellen warns of ‘significant’ AI risks to financial system
Treasury Secretary Janet Yellen highlighted significant risks posed by artificial intelligence (AI) in the financial sector, citing the complexity and lack of transparency of AI models, inadequate risk management, and the potential for systemic vulnerabilities due to widespread use of similar data and models.
Speaking at a conference co-hosted by the Financial Stability Oversight Council and the Brookings Institution, Yellen announced the Treasury’s intent to gather more information on AI usage in finance and convene a roundtable on AI in insurance.
These steps come amid concerns that a small number of AI model providers and data aggregators could lead to a monoculture, thus increasing system fragility—a concern also voiced by Securities and Exchange Commission Chair Gary Gensler.
June 5: IRS tries to use AI to close tax gap
The Government Accountability Office (GAO) has highlighted the IRS's use of artificial intelligence (AI) to enhance its tax audit selection process as a measure to close the tax gap, which is estimated at $496 billion due to underreporting.
The IRS is utilizing AI to identify returns most likely to have discrepancies, thereby improving efficiency in targeting audits. However, the GAO report criticizes the IRS for not having fully documented the technical specifications and operational details of these AI systems, which hampers consistency and transparency.
Recommendations include better documentation of AI models and an analysis to understand the root causes of undetected noncompliance.
The IRS agrees with the recommendations and acknowledges the need for better documentation to support AI implementation in tax audits, as part of its broader strategy to modernize and enhance tax compliance and enforcement.
Energy and Environmental Policy/News:
June 7: Long-Range EVs Now Cost Less Than the Average New Car in the US
The electric vehicle (EV) market in the U.S. is reaching a critical milestone as long-range models become more affordable than the average gasoline-powered car, according to a Bloomberg Green analysis.
Manufacturers like Tesla, Hyundai-Kia, and General Motors are now offering EVs with over 300 miles of range at prices below the national average of approximately $47,000.
This trend is reshaping the competitive landscape, pushing automakers to prioritize affordability to attract a broader customer base. Carlos Tavares of Stellantis highlighted the importance of competitive pricing in capturing the middle-class market, indicating that automakers must adjust profit margins and reduce costs during the transition.
The introduction of models like the Chevy Equinox, which will cost under $28,000 with federal incentives, exemplifies the industry's shift towards making EVs accessible to the average consumer.
This shift towards affordability, coupled with improving battery technology and federal incentives, suggests that EVs could achieve widespread adoption sooner than expected.
For Fun:
June 10: African elephants call each other by unique names, new study shows
New research published in Nature Ecology & Evolution reveals that African elephants use individual names to call each other, a rare trait among wild animals that enhances their complex social interactions.
Elephants, known for their intricate family groups and social dynamics, utilize low rumbles to communicate across vast distances on the savanna, with certain parts of these vocalizations serving as names.
This discovery was supported by machine learning analysis of elephant vocalizations from Kenya’s national parks, showing that specific calls could be identified as being directed towards particular elephants.
The study also found that elephants responded more attentively to recordings that included their names, indicating a sophisticated level of social communication akin to that seen in humans and some other animals capable of lifelong learning of new sounds.