Epic Real Estate Investing - IRS increases AI audits ($1.1 billion recovered so far) | 1441

Episode Date: March 12, 2025

A new report from the Treasury Inspector General reveals that the IRS has deployed 68 AI projects, 30 of which are already active, with a main focus on millionaire tax cases. The AI systems are now also targeting real estate investors, specifically those earning over $400,000 annually or with partnerships exceeding $10 million in assets. These systems detect discrepancies by cross-referencing tax returns with financial statements, identifying patterns, and focusing on partnership structures and rapid portfolio growth. The video highlights the importance of proper entity structuring, proactive documentation, and strategic tax planning to minimize audit risks. A guide for IRS Audit Defense is provided to help investors prepare and protect themselves from potential audits triggered by these AI systems. Alex's audit defense playbook: https://docs.google.com/document/d/1MTAdkD7IRcOtsMqeOaVAQXCWYiz1ZDhNuakgGZJw9Dc/edit?tab=t.0 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey, strap in. It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies, and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-aise.com. Let's go, let's go, let's go, let's go, let's go, let's go.

Let's go. The Treasury Inspector General just released a five bombshell report about the IRS's artificial intelligence program. As of February, last year, they've deployed 68 different AI projects. Here, take a look at this breakdown. That's 30 that are already active, with 38 more in development. While some reports suggest they've recovered as much as $1.1 billion, the official number stands at $482 million from millionaire tax cases alone, and it's growing by the day. Just look at how many new AI projects they launched in 2023 alone. And here's what's concerning. These aren't just targeting the ultra-wealthy anymore. If you're a real

estate investor, you need to understand what's happening. Because here's the concerning part. Even the Treasury Inspector General admits the IRS can't maintain a complete inventory of their AI initiatives. We don't even know the full scope of how they're using this technology to monitor taxpayers. What we do know is this. These aren't just customer service tools. They're sophisticated enforcement systems designed to catch things human auditors miss. And if you're a real estate investor, you're directly in their crosshairs. The IRS has created specialized units specifically targeting real estate partnerships and investment structures.

Their focus? Investors making over $400,000 annually or partnerships with assets exceeding $10 million. But here's what most people don't realize. Their AI systems are flagging similar patterns in smaller real estate portfolios, too. Let me break down exactly what their systems are looking for. First, they're cross-referencing data between tax returns and financial statements, looking for discrepancies that suggest unreported income. Their algorithms can scan everything from bank deposits to payment processor records. This isn't some basic computer program. This is their

actual AI infrastructure. Every layer of this system is designed to catch discrepancies that human auditors might miss. And for real estate investors, that means this second thing. They're targeting partnership structures, particularly what they call basis shifting transactions between related parties. Even small inconsistencies in partnership balance sheets can trigger a full audit. Third, they're using AI to identify patterns in rapid growth and asset acquisition. If you're using cost segregation studies or claiming passive losses against other income, that's an immediate red flag. One former IRS auditor I spoke with confirmed they're specifically targeting investors who show rapid portfolio growth, exactly what happened to Alex, one of my

private clients. Her story perfectly illustrates how these AI triggers can impact even careful investors who think they're doing everything right. She had properly structured her part. partnerships and was taking all the legitimate deductions available, as she should. But when her portfolio crossed that $10 million asset threshold, the AI flagged her return, not because she did anything wrong, but because her growth pattern matched what their algorithms considered suspicious. Yeah, probably my fault on that one, I guess we tend to move a little too fast now for the IRS's new comfort level. But suddenly, she was facing what every real estate investor dreads, an IRS audit notice. And they didn't just look at one year. They went back through six years of returns, long before,

before we had ever met. And this is where your network matters. While other investors might spend months scrambling to find help, Alex had immediate access to our team who understands these AI triggered audits. I mean, right away, we were able to prove her rapid growth was legitimate and properly documented, demonstrate her partnership structures were fully compliant, and justify every deduction that the AI had flagged as unusual. So instead of facing devastating penalties that could have wiped out years of progress, Alex emerged with her asset and strategy intact. What Alex's story reveals as a critical reality most real estate investors face. While the IRS is using sophisticated AI systems to catch every discrepancy, most investors are still using outdated tax

strategies and documentation methods. I mean, did you know that there are 17 specific rental property deductions that most investors never claim? Or that the way you structure your partnerships can dramatically impact whether the IRS flags your return? These aren't loopholes or gray areas. They're legitimate deductions and structures built into the tax code as incentives for real estate investments. The solution comes down to just three critical areas that our most successful members have mastered. First, proper entity structuring. The right combination of partnerships and LLCs can dramatically reduce your audit risk while maximizing legitimate tax benefits.

But timing and documentation are everything. The wrong structure actually increases your chances of being flagged. Second, proactive documentation systems. You know, those 17 rental property deductions I mentioned. Each one needs specific evidence that satisfies IRS requirements. Most investors either miss these deductions entirely. or can't defend them during an audit. And third, strategic tax planning, not just tax preparation.

The investors who thrive under this new AI scrutiny aren't just lucky. No, they're prepared. They understand that real tax protection happens throughout the year, from how you time property acquisitions to how you structure your financing. I've put together a quick guide of Alex's playbook, gave it a cool name too, IRS audit defense. It shows you exactly what's triggering these AI audits right now and the immediate actions that you can take to protect yourself.

I didn't get too fancy with it, though. It's just a simple Google Doc linked in the description, and I don't need your email or anything. You just click it and go. But inside, you'll find the specific AI triggers the Treasury Inspector General identified, an industry comparison chart to assess your risk level, the exact documentation standards that pass AI scrutiny, and how to access the same network of experts that helped Alex. Whether you grab it or not, just take this warning seriously. The IRS's new AI capabilities are already at work, and real estate investors are a specific target.

Just don't wait for an audit notice to start thinking about your tax strategy. That's it for today. I'll see you next time. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them.

God loves you and so do I. Health, peace, blessings, and success to you, a met Terrio. Living the dream. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.