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As the IRS makes headlines for cracking down on the wealthy, state tax collectors across the country have also become even more aggressive with audits of high earners, reports CNBC.
In New York, the tax department reported 771,000 audits in 2022 (the latest year available), up 56% from the previous year, according to the state Department of Taxation and Finance. At the same time, the number of auditors in New York declined by 5% to under 200 due to tight budgets.
So how are states auditing more people with fewer auditors? Artificial Intelligence.
“States are getting very sophisticated using AI to determine the best audit candidates,” says Mark Klein, partner and chairman emeritus at Hodgson Russ LLP. “And guess what? When you’re looking for revenue, it’s not going to be the person making $10,000 a year. It’s going to be the person making $10 million.”
Klein says New York state is sending out hundreds of thousands of AI-generated letters looking for revenue.
