State tax officials are using AI to go after wealthy payers

Credit: Mike Chaput

Even as the IRS makes headlines for cracking down on the wealthy, state tax collectors have become even more aggressive with audits of high earners, according to tax attorneys and accountants.

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 is New York auditing more people with fewer auditors? Artificial Intelligence.

“States are getting very sophisticated using AI to determine the best audit candidates,” said 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.”