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analytics program enablement for growth-mindset organizations

Triage For Tax Audits™

The tax system in the USA is for all practical purposes an honor system. Most adult citizens and all business entities are required by law to file tax returns. However, the truth content and accuracy of these returns are primarily left to the individuals filing them. Although revenue departments both at federal and state levels do audit the returns, the percentage of those audited is very small. This provides opportunity for tax payers to file returns with incorrect information and pay less than their fair share of taxes.

Revenue departments are doing the best they can to identify non-filers and under-reporters amongst a tremendous number of taxpayers. With a scarcity of resources available to identify and investigate such cases, they are falling behind every day. The methods employed for identification in most situations are either manually oriented or exhaustive in nature. Thus, without employing more advanced technology, revenue departments will be always at a disadvantage.

Revenue departments can benefit tremendously by employing an intelligent computer tool that can automatically identify under-reporters, rank them according to selected criteria and assign them to experienced investigators for further action. Such a tool will allow revenue departments to quickly and efficiently identify under-reporters from thousands of cases, thereby greatly increasing revenues.


Intelligent Case Identification  & Allocation

Triage for Tax Audits™ performs as an intelligent case identification and allocation system. Triage is a hybrid system combining various artificial intelligence technologies such as, neural networks, fuzzy logic and expert systems. The two main modules of Triage are: Case Identifier and Case Allocator.

The Case Identifier’s (CI) function is to identify cases and rank them according to selected criteria. The Case Allocator’s (CA) function is to assign the ranked cases from the CI to investigators for follow-up.

Case Identifier Figure 1 shows a schematic of the Case Identifier module. The CI module receives input from three sources: Returns Database, Case Profiles, and Identifier Intelligence.

The returns database contains all the returns that are to be searched. The case profiles database stores profiles used to match and identify the returns that are candidates for further investigation. The Identifier Intelligence consists of data, instructions, procedures and heuristics, which will be used by the CI to identify returns matching a specific profile and rank them according to specific requirements. The final output from the identifier will be a ranked list of cases that need further investigation.

Conceptual Representation of an Intelligent Case Identifier


Case Allocator

The Case Allocator starts where the Case Identifier left off. Input to the Case Allocator may include the following: The ranked list of cases identified by the CI, investigator skill profile, investigator work schedule, and allocation intelligence.

For each case identified by the CI, the Allocator attempts to assign the case to an investigator by matching the investigator’s skill profile and work schedule. The Allocation Intelligence consisting of data, instructions, procedures, and heuristics, will be used by the Allocator in assigning cases to individual investigators.

Conceptual representation of an Intelligent Case Allocator


General Features

Triage for Tax Audits™ is a sophisticated system which implements advanced technologies such as artificial intelligence and object oriented methodologies. The system uses complex procedures and methods to store and utilize intelligence in its mission. However, users of the system should be able to use and maintain the system with minimal effort. It is also recognized that the system’s intelligence components need to be fine-tuned over time to perfect the process of identification and allocation.

The system operates in three modes: training mode, operational mode, and maintenance mode.

In training mode, new case profiles can be developed, trained and stored in a library of profiles. In operation mode, potential cases for audit are identified and allocated. In maintenance mode, system’s intelligence update and maintenance tasks are performed.

In all three modes of operation, an easy to use graphical user interface with context sensitive help is available to the user for performing various tasks.

Benefits Increased revenues is the primary benefit derived through the use of the Triage system. This is possible because the system is able to identify potential audit cases and rank them based on the revenue each case can generate. Cases with the highest revenue generation capability may be targeted first for investigation.

Another advantage is the reduction of effort required to identify potential audit cases. Once the system has been trained to identify different types of cases in the training mode, the effort required during operational mode will be minimal. In operational mode, all that is required from the user is to specify the type of cases to be identified.

Revenue departments are struggling to increase revenues while facing cost-cutting measures and heavier case loads. Eventually, it will become impossible to achieve revenue goals with existing practices. The cycle may be broken by investing in advanced solutions such as Triage: allowing revenue departments to use their limited resources with greater intelligence, efficiency and most importantly, generate revenue on an entirely new level.


Additional Information

To initiate a discussion regarding the potential role of Triage for Tax Audits™ in your environment, please extend an inquiry.

* Triage for Tax Audits is a trademark of American Heuristics Corporation.


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