Using AI to go after wealthy taxpayers: Here's what to know

If you are worried about artificial intelligence taking your job or taking over the world, states are now using AI to go after wealthy taxpayers. Robert Frank joins us now with more. Of course it is. Yes, of course they always find a way to use AI. In other words, now tax day may be over, but audits for high earners are rising fast. And one reason is AI. High tax states like New York and California. They’ve been sending out hundreds of thousands of audit letters to high earners. New York reported 771,000 audits in 2022. That’s the latest year available. That is up 56% from the previous year. Counts and tax lawyers telling me they’ve seen audits increase dramatically just over the past six months. States have had to cut their audit staff for budget reasons, but they’re doing more audits through AI. AI programs are helping them find patterns with high earners who may be underpaying or under reporting their income. The big focus here is high earners who move to other states. During COVID, tax authorities are challenging, challenging many of those moves, saying those moves weren’t permanent and those folks still owe their state taxes. Another big target is remote workers. Now New York is going after workers who technically report to a New York office or New York headquarters, but they live and work entirely in a different state. California deficit is now $38 billion. New York’s expected to hit $10 billion next year. So these states are going where the money is, which is the high earners. Add to that the IRS is nearly doubling audit rates on higher earners as part of that $80 billion funding that they got to hire more enforcement. So. High earners are getting it from the states now and the federal So unless you’re AW2 earner, if you’re a high earner, you’re probably going to be audited by either the state or the federal government if you’re in a high tech state. Do we know at this point whether these AI audits are more accurate or if they yield a better result in terms of money back? That’s going to be the big question. Both the IRS and the states are deploying AI, and AI has been very good, they tell me, at finding patterns. Of people who in the past have underreported they find a similar profile of other people that they haven’t caught before. So you would think it’s going to be better than humans at finding those big data patterns where yes this is probably where the money is. So but but again you know 771,000 letters in 2022 and it’s increased vastly from there since. So a lot of audits for these top earners.