Accounting
AI forgeries launch new phase in anti-fraud arms race
Generative AI has improved to the point where it is now capable of producing fake documents realistic enough to fool automated systems, creating new opportunities for fraud and new challenges for those trying to prevent it.
This new capacity came as part of OpenAI’s
Anti-fraud professionals like Mason Wilder, research director with the Association of Certified Fraud Examiners, believe the issue is not so much the fake documents themselves but the fact that they can now be quickly and easily produced at an industrial scale. He noted that people have been forging documents since time immemorial, however doing so tended to need a lot of time, effort and expertise, which created a high bar for such activities. This meant that even if someone had thought about, say, inflating their expense reports with fake receipts, the effort required to do so was beyond what most were willing to do.
But now people don’t need to edit things in Photoshop or alter text with whiteout. Instead they just need to describe what they need in detail, and an AI model will produce the requested file.
“It opens the door for lazier fraudsters. You don’t even need to be sufficiently motivated or technically sophisticated to carry out a fraud scheme that 5–10 years ago would’ve required some level of technical sophistication and more motivation and time and energy. Now you can just do it in an afternoon pretty easily,” said Wilder.
This is not just a theoretical problem, as AI-generated fakes are already being used in fraud schemes, such as the case of a Singaporean man who faked $16,000 of
While there is widespread agreement this is a problem, there is less when it comes to what exactly to do about it. Some have suggested using metadata to detect AI images, with certain vendors like T&E solutions provider
“When we see that these markers are present, we have really high confidence of high accuracy to identify them as potentially AI-generated receipts,” said Ramp’s Dave Wieseneck in a
David Zweighaft, a partner at forensic accounting firm RSZ Forensic Associates, said professionals in the field might take a similar approach. There are already ways to look at documents for evidence of alteration. While theoretically someone could strip out the metadata, he said that doing so, itself, creates new evidence of alteration.
“We’ve got to move past the 2-d world we live in and look at the metadata, look at any traces that any electronic transactions or electronic modifications might leave. [We] may want to work with the software providers to come up with validation,” he said.
He added that cases like these are exactly why people developed data forensics as a field. While the actual forensic work might be more difficult and complicated when dealing with AI, he felt the overall principles were sound.
“This crisis is not new. Ever since computer-generated information has been used in litigation, it came up. … And that is where data forensics was invented—and that is where all of the legal defense work around data and making sure things were unchanged began. And now you have data validation and MD5, SHA-256, or MD64 hash algorithms to prove something was not changed from its original pristine state on the computer. This is just the latest iteration of that scenario,” added Zweighaft.
Wilder, however, said that in order for data to become a foolproof way of verifying authenticity, there would need to be some sort of widely-adopted industry standard that mandates the inclusion of certain metadata (essentially, a watermark) in AI-generated images that can’t be removed. And even if that happened, he wasn’t sure how sustainable that technique would be in the long run.
“As mainstream, institutional-type software providers agree to incorporate that into their services, there’s still a big issue: a lot of these LLMs and other AI models have been open-sourced at some point in the recent past. That means the underlying code is in the hands of whoever wants it, and they can build on top of it and make their own AI tools. So even if there is industry-wide adoption of some kind of tech standard like that, that is not going to really account for, you know, people who’ve built their own AI models. And there are a lot of really smart bad guys out there,” he said.
While the immediate instinct for many would be to solve this problem with AI, Wilder was skeptical. Automated systems are easy to fool, and even if they’re powered by AI models, AI does not have the best track record when it comes to detecting AI. He pointed to a large number of cases where people put their own work through an AI detection solution only to find the software concluding it was done by computer. Overall, he felt the tools for generation were far outpacing the tools for detection, which makes them a poor choice for detecting AI-generated fakes.
“You’ll have solutions providers telling people in the anti-fraud industry that, like, you can just use AI to solve this problem for you. And I would encourage people to exercise that professional skepticism in those contexts as well, because, you know, with emerging technologies, we’ve seen countless examples of people overstating the capabilities of AI tools. So I would encourage anti-fraud professionals to be really wary of the claims of solutions providers on the detection capabilities of their tools,” said Wilder.
Instead, he felt professionals will need to start leaning on “more old fashioned controls” such as requiring everyone to use company credit cards that can be monitored, retrieving actual financial records versus screenshots (with the employee’s consent), and generally being more diligent in monitoring for anomalies and problematic patterns. He added that most companies can view what people do on their network, and so looking to see if someone’s Internet history literally shows them making the fake receipt can help too. And to account for external fraudsters, he recommended that contracts include a Right to Audit clause that lets them request official bank records from actual financial institutions to corroborate expenses.
Todd McDonald, founder and CEO of financial intelligent software provider Valid8, however, felt that AI and automated systems must be part of the solution, even if it’s not as one generally imagines them. Recalling an exhaustive investigation into a Ponzi scheme that was done fully manually, he felt stepping away from automation was a bad idea.
“Having to recreate the books and records for a Ponzi scheme, where there weren’t tools like the ones we’ve now built to validate things—at that time, we had to spend thousands of hours recreating the books and records from subpoenaed bank records—hundreds of thousands of transactions, over 12 years, across 20 entities. That was all manual, and it did not require the best of our skills and training. It was an unbelievably burdensome effort. We had to identify what had happened before we could even move on to what we could do about it. I didn’t have that luxury. I had to go through months of painstaking work just to get a data set I could trust before I could interrogate it and understand it,” he said.
So while asking an AI “is this AI?” may not yield good results, this is far from the only option. Valid8 doesn’t look at a picture of a receipt and determine whether or not it is real but, rather, pulls actual records like bank and credit card statements or copies of deposit slips and checks, and uses that to verify discrepancies or duplications. This in mind, he himself is unconcerned with the AI’s ability to fake documentation, as his company concerns itself with the actual data.
“It really comes back to the provenance of where you are getting the support for this documentation. At Valid8, we come with a specific point of view: bank statements don’t lie. They are a fundamental ground source of truth… There’s nothing immediate we’ve done as a result of the announcement or some of the new tech that is out there. It hasn’t changed things one bit from our roadmap to expand from using bank support evidence as a ground truth and being able to augment and enhance that with additional supporting documentation,” he said.
However, he also noted that technology is only part of the solution. Having “highly trained humans” to actually interpret the data and understand the context is vital, as is training those humans to exercise professional skepticism and compliance, and checking to make sure those lessons were absorbed. There is still value in the old fashioned controls to which Wilder referred.
“You should be setting up a culture of compliance, a clear and outlined code of conduct for what the expectations are regarding expense reports. You should set up a random audit methodology, and employees should know there are consequences for that. This is just good old blocking and tackling—someone is paying attention,” he said.
George Barham, director of standards and professional guidance with the Institute for Internal Auditors, raised a similar point in that while it is unlikely people will step away from automated systems, they do need to be taught to take the outputs with a grain of salt and not blindly trust what the AI tells them.
“I think the main thing is not completely relying on what the tools give you and being critical and looking at the results and asking questions or looking for trends. ‘gosh this cost really jumped over this year, what is going on?’ I also think if you look at a large number of items, it is still a good idea to take a couple and look at those annually so that won’t be a departure from how internal audits look at things, but I think you take what tech provides and what AI provides with a grain of salt,” he said.
However, Barham was hesitant on any specific prescriptions for action, as every company is different and has different goals. So rather than outline what controls should be implemented in response to AI forgeries, he instead said it’s important that professionals sit down with managers and discuss what controls specific to the organization might be needed.
“The biggest thing is making sure we’re having conversations … with management. Hopefully, they will do an annual risk assessment and maybe a quarterly mini-assessment. But you’d like to see some actions taking place from a risk assessment. So maybe that means adding or improving some of the controls in this elevated risk area. That could include more policies, more procedures, more controls, more reviews, more authentication methods when looking at receipts and understanding the source. So it falls to how the organization understands risk,” he said.
The American Institute of CPAs is asking leaders of the Senate Finance Committee and the House Ways and Means Committee to make changes in the wide-ranging tax and spending legislation that was
In a
“While we support portions of the legislation, we do have significant concerns regarding several provisions in the bill, including one which threatens to severely limit the deductibility of state and local tax (SALT) by certain businesses,” wrote AICPA Tax Executive Committee chair Cheri Freeh in the letter. “This outcome is contrary to the intentions of the One Big Beautiful Bill Act, which is to strengthen small businesses and enhance small business relief.”
The AICPA urged lawmakers to retain entity-level deductibility of state and local taxes for all pass-through entities, strike the contingency fee provision, allow excess business loss carryforwards to offset business and nonbusiness income, and retain the deductibility of state and local taxes for all pass-through entities.
The proposal goes beyond accounting firms. According to the
The AICPA argued that SSTBs would be unfairly economically disadvantaged simply by existing as a certain type of business and the parity gap among SSTBs and non-SSTBs and C corporations would widen.
Under current tax law (and before the passage of the Tax Cuts and Jobs Act of 2017), it noted, C corporations could deduct SALT in determining their federal taxable income. Prior to the TCJA, owners of PTEs (and sole proprietorships that itemized deductions) were also allowed to deduct SALT on income earned by the PTE (or sole proprietorship).
“However, the TCJA placed a limitation on the individual SALT deduction,” Freeh wrote. “In response, 36 states (of the 41 that have a state income tax) enacted or proposed various approaches to mitigate the individual SALT limitation by shifting the SALT liability on PTE income from the owner to the PTE. This approach restored parity among businesses and was approved by the IRS through Notice 2020-75, by allowing PTEs to deduct PTE taxes paid to domestic jurisdictions in computing the entity’s federal non-separately stated income or loss. Under this approved approach, the PTE tax does not count against partners’/owners’ individual federal SALT deduction limit. Rather, the PTE pays the SALT, and the partners/owners fully deduct the amount of their distributive share of the state taxes paid by the PTE for federal income tax purposes.”
The AICPA pointed out that C corporations enjoy a number of advantages, including an unlimited SALT deduction, a 21% corporate tax rate, a lower tax rate on dividends for owners, and the ability for owners to defer income.
“However, many SSTBs are restricted from organizing as a C corporation, leaving them with no option to escape the harsh results of the SSTB distinction and limiting their SALT deduction,” said the letter. “In addition, non-SSTBs are entitled to an unfettered qualified business income (QBI) deduction under Internal Revenue Code section 199A, while SSTBs are subject to harsh limitations on their ability to claim a QBI deduction.”
The AICPA also believes the bill would add significant complexity and uncertainty for all pass-through entities, which would be required to perform complex calculations and analysis to determine if they are eligible for any SALT deduction. “To determine eligibility for state and local income taxes, non-SSTBs would need to perform a gross receipts calculation,” said the letter. “To determine eligibility for all other state and local taxes, pass-through entities would need to determine eligibility under the substitute payments provision (another complex set of calculations). Our laws should not discourage the formation of critical service-based businesses and, therefore, disincentivize professionals from entering such trades and businesses. Therefore, we urge Congress to allow all business entities, including SSTBs, to deduct state and local taxes paid or accrued in carrying on a trade or business.”
Tax professionals have been hearing about the problem from the Institute’s outreach campaign.
“The AICPA was making some noise about that provision and encouraging some grassroots lobbying in the industry around that provision, given its impact on accounting firms,” said Jess LeDonne, director of tax technical at the Bonadio Group. “It did survive on the House side. It is still in there, specifically meaning the nonqualifying businesses, including SSTBs. I will wait and see if some of those efforts from industry leaders in the AICPA maybe move the needle on the Senate side.”
Contingency fees
The AICPA also objects to another provision in the bill involving contingency fees affecting the tax profession. It would allow contingency fee arrangements for all tax preparation activities, including those involving the submission of an original tax return.
“The preparation of an original return on a contingent fee basis could be an incentive to prepare questionable returns, which would result in an open invitation to unscrupulous tax preparers to engage in fraudulent preparation activities that takes advantage of both the U.S. tax system and taxpayers,” said the AICPA. “Unknowing taxpayers would ultimately bear the cost of these fee arrangements, since they will have remitted the fee to the preparer, long before an assessment is made upon the examination of the return.”
The AICPA pointed out that contingent fee arrangements were associated with many of the abuses in the Employee Retention Credit program, in both original and amended return filings.
“Allowing contingent fee arrangements to be used in the preparation of the annual original income tax returns is an open invitation to abuse the tax system and leaves the IRS unable to sufficiently address this problem,” said the letter. “Congress should strike the contingent fee provision from the tax bill. If Congress wants to include the provision on contingency fees, we recommend that Congress provide that where contingent fees are permitted for amended returns and claims for refund, a paid return preparer is required to disclose that the return or claim is prepared under a contingent fee agreement. Disclosure of a contingent fee arrangement deters potential abuse, helps ensure the integrity of the tax preparation process, and ensures compliance with regulatory and ethical standards.”
Business loss carryforwards
The AICPA also called for allowing excess business loss carryforwards to offset business and nonbusiness income. It noted that the One Big Beautiful Bill Act amends Section 461(l)(2) of the Tax Code to provide that any excess business loss carries over as an excess business loss, rather than a net operating loss.
“This amendment would effectively provide for a permanent disallowance of any business losses unless or until the taxpayer has other business income,” said letter. “For example, a taxpayer that sells a business and recognizes a large ordinary loss in that year would be limited in each carryover year indefinitely, during which time the taxpayer is unlikely to have any additional business income. The bill should be amended to remove this provision and to retain the treatment of excess business loss carryforwards under current law, which is that the excess business loss carries over as a net operating loss (at which point it is no longer subject to section 461(l) in the carryforward year).
AICPA supports provisions
The AICPA added that it supported a number of provisions in the bill, despite those concerns. The provisions it supports and has advocated for in the past include
• Allow Section 529 plan funds to be used for post-secondary credential expenses;
• Provide tax relief for individuals and businesses affected by natural disasters, albeit not
permanent;
• Make permanent the QBI deduction, increase the QBI deduction percentage, and expand the QBI deduction limit phase-in range;
• Create new Section 174A for expensing of domestic research and experimental expenditures and suspend required capitalization of such expenditures;
• Retain the current increased individual Alternative Minimum Tax exemption amounts;
• Preserve the cash method of accounting for tax purposes;
• Increase the Form 1099-K reporting threshold for third-party payment platforms;
• Make permanent the paid family leave tax credit;
• Make permanent extensions of international tax rates for foreign-derived intangible income, base erosion and anti-abuse tax, and global intangible low-taxed income;
• Exclude from GILTI certain income derived from services performed in the Virgin
Islands;
• Provide greater certainty and clarity via permanent tax provisions, rather than sunset
tax provisions.
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Accounting
Mid-year moves: Why placed-in-service dates matter more than ever for cost segregation planning
In the world of depreciation planning, one small timing detail continues to fly under the radar — and it’s costing taxpayers serious money.
Most people fixate on what a property costs or how much they can write off. But the placed-in-service date — when the IRS considers a property ready and available for use — plays a crucial role in determining bonus depreciation eligibility for cost segregation studies.
And as bonus depreciation continues to phase out (or possibly bounce back), that timing has never been more important.
Why placed-in-service timing gets overlooked
The IRS defines “placed in service” as the moment a property is ready and available for its intended use.
For rentals, that means:
- It’s available for move-in, and,
- It’s listed or actively being shown.
But in practice, this definition gets misapplied. Some real estate owners assume the closing date is enough. Others delay listing the property until after the new year, missing key depreciation opportunities.
And that gap between intent and readiness? That’s where deductions quietly slip away.
Bonus depreciation: The clock is ticking
Under current law, bonus depreciation is tapering fast:
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027: 0%
The difference between a property placed in service on December 31 versus January 2 can translate into tens of thousands in immediate deductions.
And just to make things more interesting — on May 9, the House Ways and Means Committee released a draft bill that would reinstate 100% bonus depreciation retroactive to Jan. 20, 2025. (The
The result? Accountants now have to think in two timelines:
- What the current rules say;
- What Congress might say a few months from now.
It’s a tricky season to navigate — but also one where proactive advice carries real weight.
Typical scenarios where timing matters
Placed-in-service missteps don’t always show up on a tax return — but they quietly erode what could’ve been better results. Some common examples:
- End-of-year closings where the property isn’t listed or rent-ready until January.
- Short-term rentals delayed by renovation punch lists or permitting hang-ups.
- Commercial buildings waiting on tenant improvements before becoming operational.
Each of these cases may involve a difference of just a few days — but that’s enough to miss a year’s bonus depreciation percentage.
Planning moves for the second half of the year
As Q3 and Q4 approach, here are a few moves worth making:
- Confirm the service-readiness timeline with clients acquiring property in the second half of the year.
- Educate on what “in service” really means — closing isn’t enough.
- Create a checklist for documentation: utilities on, photos of rent-ready condition, listings or lease activity.
- Track bonus depreciation eligibility relative to current and potential legislative shifts.
For properties acquired late in the year, encourage clients to fast-track final steps. The tax impact of being placed in service by December 31 versus January 2 is larger than most realize.
If the window closes, there’s still value
Even if a property misses bonus depreciation, cost segregation still creates long-term savings — especially for high-income earners.
Partial-year depreciation still applies, and in some cases, Form 3115 can allow for catch-up depreciation in future years. The strategy may shift, but the opportunity doesn’t disappear.
Placed-in-service dates don’t usually show up on investor spreadsheets. But they’re one of the most controllable levers in maximizing tax savings. For CPAs and advisors, helping clients navigate that timing correctly can deliver outsized results.
Because at the end of the day, smart tax planning isn’t just about what you buy — it’s about when you put it to work.
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