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States Turn to Technology to Dig Up Unpaid Taxes

Spotting tax delinquents can add up to millions of dollars in savings.

by / March 22, 2010

As states' revenue bases dwindle, more public-sector agencies are turning to technologies that locate millions in unpaid tax dollars to avoid further cuts and tax hikes.

In one example, the data warehousing computer system Teradata has been implemented in eight states states so far (Texas, Missouri, Ohio, Iowa and others) and has collectively recovered more than $1.3 billion in unreported or underreported taxes, according to company officials. It's helped break down silos, open communications between federal and state agencies and buffer what would otherwise be deeper budget cuts.

"Many governments may be in a budget crunch, but some states are mitigating the need to raise taxes by investing in technology to recover money," said David Patterson, spokesman for Teradata's external public relations firm, Merritt Group.

Teradata creates a centralized data pool that "can drill into every corner of the state's tax data and automatically generates alerts that call attention to opportunities to recover taxes owed yet unpaid," Patterson said. The system discovers and identifies unpaid personal income tax, corporate income tax, sales tax and employer withholding information, said Teradata spokesman Michael O'Sullivan.

Missouri has collected more than $94 million since receiving its first payment in March 2005, Missouri Department of Revenue Communications Director Ted Farnen said in a statement.

"In addition to the revenue received that probably would have gone uncollected, one of the byproducts of the program is communication to individuals and the business community concerning specific overlooked tax obligations," the statement said. "The education of taxpayers results in increased future voluntary compliance while providing ongoing new state revenues."

Many states have the data to show individuals and companies that aren't being tax compliant, but "they don't have the tools and skills to bring it all together in one place to really analyze and get the most value out of it," said Steve Taylor, Teradata Business Development for Revenue and Compliance director.

For Oklahoma, the system has helped identify 73,000 cases of underreported or unreported taxes, which translated to roughly $16.3 million, Oklahoma Tax Commission Agency Administrator Tony Mastin said.

"It's one thing to know there's data available," he said. "It's a whole different story to have the resources to do something with that data."


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Karen Wilkinson

Karen is a former staff writer for Government Technology magazine.

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