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$5M to find tax cheats
State hopes to weed out false tax rebates
seal web

ATLANTA — In a rough economy, Georgia's leaders are looking to collect every nickel owed to the state.
    A budget proposal from Republican Gov. Nathan Deal would spend roughly $5 million annually on a first-of-its-kind database meant to identify people who steal the identities of others and use that information to falsely claim tax rebates from Georgia authorities. The budget plan, which received initial approval from House lawmakers, is now under review by the state Senate.
    "If everyone pays what they rightfully owe, we can all pay less," said Republican Rep. Larry O'Neal, the House majority leader and a proponent of tightening tax enforcement.
    Every tax dollar has become increasingly precious since the state's economy withered during the deepest recession since the Great Depression. As people lost jobs, earned less income and bought fewer goods and services, the state's tax income dried up. State lawmakers have trimmed billions in spending, creating political struggles to claim what is left.
     In the past two years, the Republican-dominated Legislature has approved hiring more than 200 auditors, fraud analysts and agents to crack down on people who do not pay taxes or fail to pay enough. State tallies show those new hires cost the state roughly $19 million, but they have brought in roughly $135 million in extra funding in the last two years.
    "We really haven't even reached the point of what I would call diminishing returns," O'Neal said.
    Now, state officials are focused on using technology to prevent the state from paying out bogus tax rebates. For example, two years ago a cluster of people around Montgomery, Ala., used personal information taken from inmates — people who were not filing tax returns — to claim false tax rebates in Georgia, said Staci Guest, director of the Office of Special Investigations for the Georgia Department of Revenue.
     Those filing for fraudulent tax rebates typically use stolen personal information from another person and file fake returns early in the year. By the time the rightful owner seeks his rebate from the state, there can be trouble if the rebate has already been paid to a fraudster.
     A pilot program launched in January aims to prevent that problem by contracting with an outside vendor who electronically compares information taken from tax returns with data available in some 20,000 databases, Guest said.
     If the vendor detects a problem — for example, names, addresses or Social Security numbers that do not match — the refunds are automatically referred to tax officials for more scrutiny. Those submitting flagged returns will be required to answer questions about themselves to prove their identities using either an Internet site or a special phone line.
     "The issue is that we don't pay out more money than someone paid in," Guest said. "We want to pay the refunds that are due. We just don't want to pay people who are stealing other people's identifies."
     Cycling that information through the database system should add one or two days to the time it takes to process a return, said Greg Peacock, chief financial officer for the Department of Revenue. The state has added more staffers to the call-in center so it can assist those whose tax returns require more checking.
     Defining how much money Georgia loses to tax cheats is difficult. Guest said state officials blocked about $75 million in rebate payments during the last fiscal year ending in June because they were believed to be fraudulent or the result of errors.
     Getting a firmer figure on the gap between what the state is owed in tax payments versus what it actually collects is also challenging. A 2006 study by the Fiscal Research Center at Georgia State University noted that people reported about $3 billion less in income when filing their state tax returns than their federal tax returns. About 7 percent fewer people filed state returns than federal returns.
     Researchers said that discrepancy suggested that personal income was going unreported.

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