How States Are Cracking Down on Small Business Tax Cheats

Big data is for tax collectors, too.

Small businesses and the self-employed stiff the federal government on billions of dollars (PDF) in unpaid taxes each year, according to IRS estimates of the tax gap. That’s the difference between taxes owed and the amount actually collected. States also have tax gaps: California’s is about $10 billion annually, and the Golden State is investing $670 million over five years in technology to improve its collections, expected to raise an additional $1 billion a year in tax revenue.

Big data is for tax collectors, too. We hear plenty about how big data can help companies, large or small. Tax collectors are finding new ways to use data, according to BNA. Florida is working on a program to use car sales data collected by its Department of Highway Safety to make sure auto dealerships report sales figures accurately. Tennessee and Texas have similar programs to keep beer and tobacco retailers honest by gathering data from wholesalers. Georgia, Indiana, Louisiana, and Massachusetts are among states working with legal information company LexisNexis to cross-reference tax filers’ personal information against historical addresses.

By Patrick Clark

Full Story: http://www.businessweek.com/articles/2014-03-11/how-states-are-cracking-down-on-small-business-tax-cheats#r=hpt-fs