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Conference Speakers Discuss Risks and Rewards of Technology in Federal Tax Practice

S.J. Steinhardt
Published Date:
Nov 10, 2023

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Technology- and fraud-related issues were among those considered by two tax experts who spoke at at the Federal Tax and Legislative Update session of the Foundation for Accounting Education’s Tax and Financial Planning for Individuals Conference on Nov. 9. Attorney Frank Agostino is the founder and president of Agostino & Associates, P.C.; he previously served as IRS district counsel. Walter Primoff is a director at Perelson Weiner LLP, CPAs.

Encouraging CPAs to use generative artificial intelligence (AI) tools such as ChatGPT and BingAI in their practices, Agostino outlined some of the uses of AI and gave a brief primer on how to use these tools.

He told the attendees that he uses the service known as Poe (for Platform for Open Exploration), which allows users to ask questions and obtain answers from a range of AI bots built on top of large language models (LLMs). Working with this service allows the user to customize prompts to eliminate the phenomena known as hallucinations—nonsensical or inaccurate outputs created by LLMs.

Its use for penalty abatements is limited to knowledge taken from the IRS’s Internal Revenue Manuals, he cautioned, but it can be used for tax protests and to adjust 30-day letters. “It’s like having a partner writing with you,” he said. “It will save you a lot of time, but you will need to put in the time to learn how to use it.”

Agostino also advised the attendees to “perfect your prompts for penalty abatements” by reading IRS Publication 5 to determine what should be in a protest. He warned that ChatGPT, one of the bots used by LLMs, “has a 2021 drop-dead date.” Noting that these tools are “not 100 percent secure,” he emphasized that CPAs need to “scrub out taxpayer identification data” when using them. He also encouraged CPAs to take any one of the freely available courses to learn how to work with AI and to learn to write concise prompts in the active voice.

“IRS agents don’t want War and Peace,” he said. “Learn to write prompts. That is the biggest tax update that I can give you.”

Turning his attention to the Employee Retention Credit (ERC)—which he said “is giving the IRS and tax professionals lots of heartache”—Agostino explained the IRS’s recently announced withdrawal process before launching into the tale of a spectacular fraud case involving a Bergen County, N.J.-based solo practitioner.

The practitioner in question prepared and submitted 1,387 false forms to the IRS to claim COVID-related tax credits on behalf of himself and clients from November 2020 to May 2023. The IRS said that the practitioner sought more than $124 million in claims when it made the announcement of his arrest in July, but Agostino said that the number has risen since then.

“So far, the IRS identified [between] $129 million and $200 million” in fraudulent claims from this individual alone, he said. “But that’s not the biggest case,” he added. The total amount of ERC-related fraud “now may hit one trillion dollars,” he said.

Earlier in the program, Primoff discussed some general trends that CPAs should be aware of.

One of them is the IRS Strategic Operating Plan. “If you are in general practice, it is worth reading,” he said. In it, he noted, are some of the agency’s aspirations, many of which are already underway as a result of funding provided by the Inflation Reduction Act, including improved customer service and technology.

“Taxpayer service [has] gotten easier,” and the IRS's updated and advanced technology would allow it to recoup $2 billion to $3 billion, he said. “If they do this right, this will have a significant impact on society,” he said, exhorting the attendees to be mindful of their own systems.

“CPAs should have IT professionals to come in and help [them] with [cybersecurity],” he said, highlighting two recent Security Summit Notices: IR-2023-138, which warned of phishing scams and cloud-based schemes to steal client information; and IR-2023-143, which provided signs that could indicate identity theft.

Primoff advised against keeping legacy software. “You have to have up-to-date software with up-to-date security that provides updates,” he said. To buttress his point, he encouraged the attendees to read “When Identity Thieves Hack Your Accountant,” a 2018 article by computer and internet security investigative journalist Brian Krebs.

“If you want something that will keep you up at night, take a look at that,” he said. 

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