Data Mining Compliance Initiatives Iowa Department of Revenue Tax Gap Compliance Program MSATA...

Data MiningData MiningCompliance InitiativesCompliance Initiatives

Iowa Department of Revenue Iowa Department of Revenue

Tax Gap Compliance Program Tax Gap Compliance Program

MSATA Annual Conference

Traverse City, Michigan

August 22, 2006

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Common Data Mining GoalsCommon Data Mining Goals Optimize revenue

- Identify areas of non-compliance

- Create “smart” audit leads

Improve knowledge base about customers

- Build customer segmentation models

- Determine problem-resolution for non-compliance

Support decision making techniques

- Measure and analyze results

- Obtain answers to critical business questions

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Data WarehouseData WarehouseAccountsAccounts ReceivableReceivable

Integrate Multiple Source SystemsIntegrate Multiple Source Systems

BMF/BRTFBMF/BRTFIMF/IRTFIMF/IRTF

StateState

Tax DataTax Data

Other Other Federal Federal

DataData

Workforce Workforce

DevelopmentDevelopment

Other Other StateState

AgencyAgency

Secretary Secretary

of Stateof State

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Model Data Using Common IDsModel Data Using Common IDs

StateState Federal Federal Driver Driver Property Property Other OtherTax Tax Tax Tax License License Tax Tax State StateReturnReturn ReturnReturn DataData DataData AgencyAgency

SSNSSN SSN SSN SSN SSN SSN SSN SSN SSN

FEINFEIN FEIN FEIN FEIN FEIN FEIN FEIN

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Link Data Using Diverse IDsLink Data Using Diverse IDs

Data WarehouseIdentification

Link

IndividualSSN

Sales Tax Permit #

Corporation FEIN

Employer ID #

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Match Common Data Across Match Common Data Across Source Source SystemsSystems

StateState State State State State Federal Federal Federal FederalSalesSales IndividualIndividual CorporationCorporation IndividuaIndividual l CorporationCorporation

Gross Sch CGross Sch C Gross Sch C Gross Gross Sch C Gross SalesSales Receipts Receipts Receipts Receipts

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Identify Areas of Non-ComplianceIdentify Areas of Non-Compliance

Seamlessly match data from multiple data sourcesSeamlessly match data from multiple data sources

Perform complex analysisPerform complex analysis Determine filing requirementDetermine filing requirement Score and rank (prioritize workload)Score and rank (prioritize workload) Analyze audit results (Return on Investment)Analyze audit results (Return on Investment)

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Non Filer Program MatchesNon Filer Program Matches

Federal Returns Filed vs. Iowa Returns (includes Federal Returns Filed vs. Iowa Returns (includes IRMF documents)IRMF documents)

Iowa Workforce Development vs. Iowa Corporation Iowa Workforce Development vs. Iowa Corporation and Sales Returnsand Sales Returns

Iowa Partners and Shareholders from Iowa Iowa Partners and Shareholders from Iowa Partnership and S Corp ReturnsPartnership and S Corp Returns

Iowa Registration Match vs. Corporation, Sales, and Iowa Registration Match vs. Corporation, Sales, and Individual ReturnsIndividual Returns

Property Transfers (Sellers) vs. Iowa ReturnsProperty Transfers (Sellers) vs. Iowa Returns

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Filing With Workforce Development Filing With Workforce Development But Not IDRF? But Not IDRF?

How many employers are filing unemployment records How many employers are filing unemployment records with Workforce Development, but not filing tax returns?with Workforce Development, but not filing tax returns?

Program Start Date - March 2000 Program Start Date - March 2000

Leads GeneratedLeads Generated

8,292 Corporation Income Tax 8,292 Corporation Income Tax

3,833 Sales Tax3,833 Sales Tax

1,7231,723 Retail Sales Tax Retail Sales Tax

13,848 Total Leads 13,848 Total Leads

$ 26,774,000 Taxes Collected (June 06)$ 26,774,000 Taxes Collected (June 06)

1010

IA Income Earned From a Partnership IA Income Earned From a Partnership or a S-Corpor a S-Corp

PartnershipPartnership - Program Started Dec 2001 - Program Started Dec 2001

Leads Generated - 6,100 Individual, 3,090 Leads Generated - 6,100 Individual, 3,090 CorporationCorporation

Individual Tax Collected - $9,917,267 (June 06)Individual Tax Collected - $9,917,267 (June 06)

Corporation Tax Collected - $ 876,402 (June 06)Corporation Tax Collected - $ 876,402 (June 06)

S CorpS Corp – Program Started July 2002 – Program Started July 2002

Individual Leads Generated – 5,400Individual Leads Generated – 5,400


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Registered, But Not Filing Tax Returns for Registered, But Not Filing Tax Returns for Other Tax TypesOther Tax Types

How many businesses are registered with IDRF, but notHow many businesses are registered with IDRF, but not

filing tax returns?filing tax returns?

Program Start Date - March 2000 Program Start Date - March 2000

Leads GeneratedLeads Generated 999 Corporation Income Tax 999 Corporation Income Tax 1,000 Sales Tax1,000 Sales Tax

229 Consumer Use Tax229 Consumer Use Tax3,7673,767 Individual (started 11/04)Individual (started 11/04)5,995 Total Leads5,995 Total Leads

$ 4,598,500 Taxes Collected (June 06)$ 4,598,500 Taxes Collected (June 06)

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Under Reporter Match ProgramsUnder Reporter Match Programs

Federal AGI vs. Iowa Net IncomeFederal AGI vs. Iowa Net Income

2210 and 2220 Underpayment of Estimate Payments2210 and 2220 Underpayment of Estimate Payments

Federal Refund Add Back on Individual Iowa ReturnFederal Refund Add Back on Individual Iowa Return

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Federal AGI vs. Iowa Net IncomeFederal AGI vs. Iowa Net Income

Program started November 2004Program started November 2004

Refine information from sources to get the closest Refine information from sources to get the closest match possible on these amountsmatch possible on these amounts

Leads Generated – 24,377Leads Generated – 24,377


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Federal Refund Add BackFederal Refund Add Back

Federal refunds received by individuals must be reported onFederal refunds received by individuals must be reported onthe Iowa income tax return.the Iowa income tax return.

Program Start Date March 2001 Program Start Date March 2001

Tax Periods 1995 - 2004Tax Periods 1995 - 2004

Refreshed 5 timesRefreshed 5 times

Leads Generated – Over 75,000Leads Generated – Over 75,000

Average per Tax Year – 1Average per Tax Year – 155,300,300

Total Collected - $ 8,735,000 (June 06)Total Collected - $ 8,735,000 (June 06)

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Build Reports to Display Query Results Build Reports to Display Query Results for Specific Taxpayersfor Specific Taxpayers

Name, Address, and TIN Locator Reports using all Data Name, Address, and TIN Locator Reports using all Data Sources within the WarehouseSources within the Warehouse

Various federal information, state tax information and third Various federal information, state tax information and third party sourcesparty sources

Return information (federal and state), payment Return information (federal and state), payment information, and audit information for a specific taxpayer information, and audit information for a specific taxpayer and specific tax periodsand specific tax periods

Third party information – example IWD employersThird party information – example IWD employers

Information views for the various programs – 2210/2220, Information views for the various programs – 2210/2220, CP2000, EOAD, Federal Refund Add Back, Partnership/S CP2000, EOAD, Federal Refund Add Back, Partnership/S Corp, and Property TransferCorp, and Property Transfer

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Analyze and Measure Audit ResultsAnalyze and Measure Audit Results

What is the ROI for audit program XX from MM/YY to What is the ROI for audit program XX from MM/YY to MM/YY?MM/YY?

What are the characteristics of the results of program set What are the characteristics of the results of program set XYZ?XYZ?

What is the % of billing dollars received, adjusted, protested, What is the % of billing dollars received, adjusted, protested, and outstanding for each audit program?and outstanding for each audit program?

What is the % and $ of Iowa’s non-compliant population?What is the % and $ of Iowa’s non-compliant population?

Other reports –Other reports – Monthly – Annual (Fiscal Year) Executive Monthly – Annual (Fiscal Year) Executive Reports on Hours, Number of Audits, Established and Reports on Hours, Number of Audits, Established and CollectedCollected

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Iowa’s Tax Gap SuccessesIowa’s Tax Gap Successes

Optimize Revenues Optimize Revenues

$69,650,000 since March 2000 (6+ years)$69,650,000 since March 2000 (6+ years)

Improve knowledge base about customersImprove knowledge base about customers Locator ReportsLocator Reports

Support decision making techniquesSupport decision making techniques Key Business QuestionsKey Business Questions Taxpayer segmentationTaxpayer segmentation Analyze audit resultsAnalyze audit results Measure tax gapMeasure tax gap

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Questions?Questions?

THANK YOU!THANK YOU!

Linda WardLinda Ward

Tax Gap Program ManagerTax Gap Program Manager

Compliance DivisionCompliance Division

Iowa Department of RevenueIowa Department of Revenue

Office: 515.281.7746Office: 515.281.7746

Email: [email protected]: [email protected]

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