Fighting tax fraud at the Iowa Department of Revenue

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fighting-tax-fraudThe Data For Good initiative is all about using data and analytics to improve the lives of citizens around the world – however most people wouldn’t immediately think about tax collection as a humanitarian effort. But that’s exactly how Courtney Kay-Decker, Executive Director of the Iowa Department of Revenue sees the work of her department.

“Our mission is to collect all tax due – and no more,” said Courtney Kay-Decker, IDR’s Director. “Eliminating fraud, waste, and abuse – and using tax revenues responsibly -- benefits all citizens of Iowa.”

Iowa reports about 1.5 percent of filed tax returns are fraudulent – a fairly low percentage. But it can add up to millions of dollars in fraudulent refunds. That’s why fraud analytics sit at the core of the Iowa Department of Revenue’s (IDR) operations.

The first step? Start reviewing incoming tax returns for compliance – which hadn’t been done until Decker took over the department – to identify the data points that typically indicate non-compliance.

Partnering with several technology vendors, including SAS, the Iowa Department of Revenue has built flexible tools and fraud models, such as SAS Fraud Framework, that morph to meet fraudsters’ constantly shifting strategies. IDR is even incorporating publicly available data to try to identify characteristics that predict indicators of non-compliance or fraud. They also share findings among multiple agencies since people who commit fraud usually hit multiple channels.

Here’s an example Decker shared: “We have a property tax reimbursement and tax credit programs for seniors and the disabled. Between the two programs, we send out about $40 million a year. To qualify, you have to live in a property that’s subject to property tax. Using analytics, and using public data like GIS and property tax info, we discovered property managers who were managing properties that were tax-exempt but encouraging residents to apply for the tax credit, which they then turn over to the property managers.

It’s a game of cat and mouse that keeps Decker and her team on their toes, driven by the desire to use their data for the good of Iowan citizens at large. “I heard this first from my CIO: We have to be perfect 100 percent of the time; fraudsters have to only be perfect once.”

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Kelly Levoyer

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