Louisiana Department of Revenue Office Audit Discovery Program What is Discovery? Discovery will perform automated searches through external data sources to find all taxpayers who either did not file their state taxes or understated the amount of taxes they owed. Discovery functionality will then perform actions on those taxpayers by creating adjustments, sending bills, letters, or a combination. Discovery may effect many users 1
Overview Data Associate CP2000 IMF/IRTF BMF/BRTF 1099 Etc IRS Entities Score Entities Send Letter MVD DOL Fish&Game Etc Other State Agencies Create Case Customer Info Return Info Collection Info Data Warehouse Legacy Data W2 Other Search and Compare Any Associated Data Mine the data! Create Assessments DEFINITIONS DATA GROUP Logical grouping of data sources associated with a particular tax group. DATA STORE Grouping of data according to some common attributes (W2s, CP2000, 1099s, ETC.). ENTITY Tightly associated collection of data from different sources that is matched on an individual by a key field (SSN, EIN, TIN). RULE Search criteria that evaluates and includes or excludes an entity for selection. Used in discoveries. DISCOVERY - Group of entities that meet a certain set of rules created by the customer. 2
Data Grouping Data Groups INCOME BUSINESS ESCROW Data Stores Mappings Views Entities Dataload (files) Data Group List A data group is a collection of data stores. Examples: Individual Income More than one repository can be defined. Each is independent of the other. Each repository has full functionality. Repository is stored in its own database. Action buttons Fields Detail Button 3
Data Group - Income Data Store Detail 4
File Mapping Repository Create a new data store Define views for the new data store Define associations information Define a file mapping Load data into the data store Associate new data to entities 5
Discovery Functionality Rules Discovery Selection Actions Scoring Discovery Entities Perform Actions Create a Discovery Search and Compare Data Using Rules Rules are built in pieces and used by referring to simple rule names Rules can be executed and refined in real time online Repository data identified by a rule can be browsed Rules can be used in multiple discoveries A rule or combination of rules creates a discovery by selecting entities that fit the rule criteria 6
Rule List List of previously defined rules Rule Multiple condition statements Results are real time Reusable 7
Discoveries Discovery Discovery using multiple rules Indicates the subset of the data when rules are applied Current stage or stages of the discovery 8
Actioning Based on stages Creates events for further processing Additional conditions can be applied Results of a Discovery After a discovery has been created actions may be performed to do the following activities: Create period level indicators for any action taken Add a return if one does not exist Adjust a return if significant changes have occurred Send letters notifying taxpayer of findings Send bills on the above examples 9
External Data Sources: CP2000 Fed/State Match RAR IMF/IRTF; BMF/BRTF 1099 Misc FEIN Non-Itemizer PTIN, Corp Affiliate, etc. W2 s Other agencies Before Discovery In the past, one person manually processed RAR s. The number of paper RAR s s received were not tracked but were estimated to be about 6,000 per year. Only 1,000 were worked. FedState matches were processed in Legacy by the Collections Department. CP2000 s s were not processed prior to Discovery. 10
Current CP2000/RAR Process If a return exists, change return with federal data Add an indicator and field flag indicating source of change Send a recomp notice Automatically begin billing SOFA Suspend further returns on the filing period Proof from IRS is needed to change the amended return Current FedState Match Process Send Questionnaire Add estimate to taxpayer with provided IRS Data and W2 data Automatically begin billing SOFA Suspending further returns on the period are undesirable Return overlays estimate 11
FedState Match Questionnaire There are 3 ways to identify a Discovery Indicators Different Re-comp Notice Return Detail Discovery Grid (Income Returns) 12
Period level indicators will be created to show all users if an account has been discovered upon. Discovery Indicators: CP2000 Adjustment RAR Adjustment Fed/State Match 1099 Misc Indicator example 13
You can also look at a taxpayers Re-Comp Notice. Special Re-Comp notices will be created to ensure that the taxpayer and the users will understand why an adjustment has been made. Discovery re-comp notices will be sent to taxpayers shortly before the bills are sent. Both the re-comp notices and the bills (SOFA) will be available in the Letters Manager for all users to view. Re-comp example 14
Recomp example cont d. SOFA (Statement of Account) 15
SOFA Cont d. Return Detail Discovery Grid 16
Further Discovery Information From the Return Detail, selected users may jump to a special Discovery screen to view related Discovery data in the Entity Manager. The Discovery Action button requires a certain level of security that must be requested by your director. This button allows you to view the information received from Federal sources that LDR has used to make an adjustment. This same information is on the re-comp notice for those users who do not have this security. Discovery Button / Entity Manager 17
CP2000 Calculator The CP2000 Calculator was created to allow end users to reconstruct how the new Federal Adjusted Gross Income was calculated. RAR s s Before Discovery Fiscal Year 2003-2004 2002-2003 2001-2002 # Billed 1163 994 1491 Amt. Billed 1,132,338.41 1,407,544.22 1,415,391.66 18
RAR s s Since Discovery FYE 6/30/05 FYE 6/30/06 Total # Billed 1,140 11,983 13,123 Amt. Billed $ 509,819.47 2,698,271.39 3,208,090.86 Note: Does not include RAR s s not billed yet. Includes paper RAR s s uploaded. CP2000 s # Billed Amt. Billed FYE 6/30/05 11,008 $5,168,963.80 FYE 6/30/06 4,407 3,045,021.90 Total 15,415 8,213,985.70 Note: Does not include CP2000 s s not billed yet due to the hurricane indicators. 19
FedState Match # Billed Amt. Billed FYE 6/30/06 35,202 $54,776,641.38 Held By Hurricane Indicator Project CP2000 FedState RAR Total # Held 1,871 10,478 2,145 14,494 $ Amount Held $1,109,568.77 16,913,489.19 630,865.41 18,653,923.37 20
Records Processed Billings Cube 21
Collections Cube Problems with the automation Testing Lessons learned 22
Other Discovery Projects Field Audit Leads Tobacco US Customs Updated NAICS codes 1099 Misc Update FEIN # s# DMV database LA Dept of Labor Etc. 1099 Misc Tax Year 2003 Individuals: 361,325 records matched 78,464 new records with a potential of $817,735,621.00 unreported income Business: 32,392 business FEIN s s not registered in LA 23
THIS IS JUST THE BEGINNING... Questions? 24