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The name “Watson”–the IBM supercomputer that beat human Jeopardy champions handily–has become a fixture in today’s lexicon. So much so that the New York State Department of Taxation has partnered with IBM and is using the same technology developed for Watson to review tax returns. Thomas H. Mattox, the tax commissioner explained that their new systems incorporates the use of “business analytics” to determine the merit of tax returns. In other words, Watson is helping NY to catch cheaters.
It is not surprising that the IRS & States are employing this type of technology given that most tax returns are required to be filed electronically. These returns can be analyzed in seconds–what would normally take humans days. Furthermore, EVERY return can now be analyzed instead of randomly selecting returns for audit. Over the last couple of years, NY taxpayers started receiving “pre-refund” letters as soon as 7-10 days after tax returns were filed. It’s hard to see how these letters–which requested additional documentation before a return would be processed–could be sent out so fast without the help of computers.
So, it is quite evident that NY State has gotten their act together and entered the 21st century. Unfortunately, many NY taxpayer’s refunds are being delayed even though they have legitimate deductions and credits. Our advice is to make sure NY taxpayers keep all of their documentation organized and on hand in the event NY sends a letter requesting more documentation. The worst thing one can do is to not reply to these letters even if their proposed adjustment is marginal. Not only will you get less of a refund you deserve, but your next year’s tax return is almost guaranteed to be flagged for a “pre-refund” letter again.
Contact R&G Brenner for more information on this subject and to speak with a tax professional today.