IRS tests Palantir Foundry to connect 60+ legacy tax systems

In short: The IRS is testing Palantir’s Foundry software to link more than 60 older internal systems and help surface “highest-value” audit and investigation targets.

What happened

Documents reviewed by Wired say the U.S. Internal Revenue Service has been testing Palantir’s Foundry platform as part of a project to build a “unified data layer.” In simple terms, it is meant to make many separate IRS databases and case tools act more like one connected system.

The IRS has long relied on a patchwork of older case management systems. Some are so old they use Assembly code, a low-level programming language dating back to early computers. The goal is to let staff query those older systems more easily, like searching one modern database instead of checking dozens of filing cabinets.

A key part of the setup is an “ontology layer,” which is basically a shared map of what the data means and how it connects. For example, it can link people, businesses, addresses, and assets, so AI tools can spot relationships that might point to tax fraud or other issues. Wired reports contracts were awarded for this work, but the exact testing phases and the specific tools used to find “highest-value” targets are not fully public.

Why it matters

Using AI to help choose audits can bring in more money than random selection, but it can also raise fairness concerns. A 2023 Stanford study found IRS audit selection systems disproportionately targeted Black taxpayers, partly because the system optimized for cases that were faster and cheaper to check. As the IRS connects more data and leans more on automated targeting, how it tests for bias and adds oversight will likely become a central question.

Source: Wired