Calif. gets funds from its nonfilers

Fourteen million Californians file their state tax returns voluntarily, but the ones who don’t file keep Cathy Cleek and her team busy. Cleek is director of the Franchise Tax Board’s nonfiler program.

The board each year examines more than 100 million sets of data from sources such as the IRS, bank records, W-2 forms, mortgage interest forms, occupational licenses, stock sale certificates and state agencies. Most of the data arrives in electronic format, Cleek said.

In the 1970s, if the data arrived incomplete or imperfect, “we didn’t use it,” Cleek said. For example, if the first or last name or Social Security number was missing from a return, it was thrown out.

In 1999 the board launched a project called the Integrated Nonfiler Compliance System—a data warehouse with 4T of taxpayer data, a case management system and a self-service taxpayer Web portal built with IBM WebSphere. The compliance system uses Blaze Advisor business rules software from HNC Software Inc. of San Jose, Calif., to discern taxpayer patterns and fill in the holes of incomplete records.

“We used to throw out 8 million records a year because of incomplete data. Now we can bring those in,” Cleek said.

Blaze Advisor, a Java application with a drag-and-drop graphical interface, runs under Microsoft Windows, IBM mainframe operating systems, Linux and other OSes, said Ken Molay, HNC’s product director.

“Tax exemptions change every year, and with Blaze Advisor, we can make changes to our business rules in a day,” Cleek said.

She said it was easy to train one of the board’s business analysts—who had no programming experience—to become the Blaze Advisor programmer. “He understands the business better than a IT specialist would,” she said.

The board has taken in an extra $116 million in tax revenue with the compliance system since 1999, Cleek said, and it has received several awards.

Taxpayer education is part of the board’s responsibilities. “One of our agents got a call from a prostitute who thought her income was untaxable,” Cleek said. “We had to tell her that even though her occupation is not legal in California, she still has to pay taxes on her income.”

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