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If AI can forge perfectly W-2 and tax documents, how will IRS know what is real in the future? Initially appeared Bed: The place to win and share knowledge, to empower people to learn from others and to better understand the world.
Answer By Pat Kinsel, founder/CEO Proof.com & formerly capitalist Venture, on Bed:
Nothing is certain in life except death and taxes. And fraud. As fast as innovation comes to life, there will be plans of fraud that will follow behind.
The IRS is facing a growing challenge, as AI developments make the document to be more and more difficult to detect by traditional means. Currently, verification systems are based on patterns and cross -reference to data undergoing employers, but these approaches become inadequate when dealing with sophisticated AI forgery that can reproduce documents accurately.
The government’s formal approach to tax fraud was reactive. The IRS ministry and the Ministry of Finance are often based on sanctions – threatening financial punishment and criminal prosecution for tax fraud. While this can prevent some potential scammers, it does nothing to prevent technological potential from committing fraud in the first place. Once processed with fraudulent returns and disbursement returns, recovery becomes extremely difficult and persecution is rare compared to the volume of fraud.
Treating this issue requires a fundamental shift from reactive imposition on preventive verification. Instead of detecting forgery after submission of documents, we need a system that makes forgery technically impossible or immediately recognizable. This can be achieved by verifying the digital identity of tax documents at each stage of their life cycle.
Here’s how a safer system could work: When employers submit W-2 to the government, each document will include a cryptographic signature (digital certificate) uniquely connected to the version. This certificate, embedded as a metadata into the document, would create an unchanging record of its authenticity and source. IRS will maintain a verification database of these certified documents. When individual taxpayers receive these W-2s and submit them with their tax returns, tax preparation software or IRS systems will automatically verify built-in certificates against this database. Any document that does not have the appropriate certification or displays signs of breach will be marked immediately.
Such a system would shift the verification of the tax document from the subjective issue of “does this seem legal?” In the objective question of “this document contains the required cryptographic proof of authenticity?” This approach is not theoretical – it is based on the same public infrastructure technology (PKI), which supports much of today’s internet security. By incorporating a verified identity into each tax document, this system would create a permanent, controlled and mechanical path that guarantees the integrity of each tax form. Each document will be digitally signed with a verified identity, eliminating the risk of forgery and ensuring the authenticity of both the publisher or the individual and the document himself.
This could be further enhanced by adding a second layer of cryptographic protection when taxpayers submit their returns. Through a simple digital signature process, taxpayers will confirm the accuracy of the documents, adding their own verification to the chain.
The technology to secure our tax system exists today and has been successfully applied to other areas that require high security. What is missing is government will and investments to address emerging technological threats preventive and not reactive.
As AI capabilities continue to move on at an exponential rate, the window for implementing effective countermeasures narrows. Without fundamental displacement for cryptographic signed tax documents, we face a future where IRS may not be able to distinguish legal returns from sophisticated forgery, undermining not only the collection of taxes but also the public’s confidence in government systems.
The question is not whether we can afford to apply such security measures, but if we can afford.
This question Initially appeared Bed – The place to win and share knowledge, to empower people to learn from others and to better understand the world.
