High-tech collector

South Carolina is cracking down on tax dodgers and deadbeats, employing a sophisticated new computer system to increase tax collections by at least $100 million over the next five years.

This week, the S.C. Department of Revenue will implement the first phase of the high-tech system that — like the alien creature in the movie “Predator” — will hunt down tax welchers and nail them like they’ve never been nailed before.

The computer will send out 1,000 letters this week to suspected noncompliers. In months to come, it will send out up to 3,000 letters a week.

“It will revolutionize tax collection in South Carolina,” said Department of Revenue director Burnie Maybank. He said nonfilers and tax underreporters deprive the state of tens of millions of dollars each year.

Maybank’s new computer is actually two refrigerator-sized racks with Hewlett-Packard servers and a storage device. The assemblage is gleaming black with blinking red lights. Eventually, it will hold more than 300 million records, more personal data about South Carolinians than any computer system anywhere.

The computer gives state tax officials the ability to instantly match and cross-index data about people and businesses from multiple databases. It uses inconsistencies — such as someone with a $30,000 declared income buying an $80,000 car — to identify potential offenders. Then, the computer writes suspected non-compliers a letter, detailing its evidence and asking for an explanation — or money.

The new computer can do the work of a small army of human accountants, quickly spotting nonfilers and people who underreport their income.

“That is the beauty of this system,” Maybank said. “It does our audit selection for us.”

NOWHERE TO HIDE

Maybank said tens of thousands of South Carolinians either don’t file income tax forms or underreport their income. In part, that is because they know there is little chance they will be caught.

With its out-of-date computers, the state primarily catches only the most obvious tax noncompliers, such as those who fail to report big stock dividend checks, Maybank said.

In theory, the state is supposed to match up state and federal tax data. But that didn’t happen easily. The IRS sent its data to South Carolina on reels of tape that were difficult to access. Now, the IRS data is loaded into the new computer and is instantly retrievable.

The new system also will analyze data.

For example, it will pinpoint a filer who claims a $30,000 charitable contribution and only a $60,000 income, he said. It also will scrutinize taxpayers in occupations that have a record of noncompliance, such as real estate agents and airline pilots, Maybank said.

The new computer was installed by Revenue Solutions, a Massachusetts firm specializing in high-tech tax collection.

Its software goes by the generic name of “data warehouse.” Inside the computer is a “virtual warehouse” of different sets of data — including all S.C. residents’ state and federal tax forms, S.C. Department of Motor Vehicle records and S.C. Employment Security Commission records. The computer “mines” the data from different databases.

Revenue Solutions installed a similar system for the state of Massachusetts several years ago.

“We figure it brings us an extra $1 million to $1.5 million a week,” Massachusetts revenue official Tim Connolly said. Over two years, the system generated about $150 million for Massachusetts in extra taxes, mostly from nonfilers and underreporters, he said.

S.C. tax officials estimate the computer will bring in $100 million over the next five years — the life of the Revenue Solutions contract. Under that contract, the company gets no payment other than a commission of 20 percent of the money collected.

(That money is not included in the $90 million that Maybank promised legislators he would collect if they would allow Revenue to hire more staffers.)

No one knows for sure how much money the new computer will bring in. It will be another year or two before it and the related tax collection processes run at peak efficiency. Meanwhile, officials plan to load some 200 million additional business and other records into the computer. Already, about 60 million records have been loaded.

SUPER SAFEGUARDS

State tax officials say they are installing high-security measures to protect the data. It is not connected to the Internet, so hackers can’t get into it. Inside the Revenue Department, only authorized people can access the data.

Officials also say they have fine-tuned the system to avoid targeting the wrong people.

“We try very hard to verify everything; for example, that we have the right John Smith,” said Terry Garber, Revenue’s senior technology manager.

Since late February, the department has tested the system, sending out 1,000 letters to suspected noncompliers

Already, Revenue has received $50,000 from noncompliers from that test and located others who will pay back taxes in the future, officials said.

One noncomplier was living in Florida. That state has no income tax. But the individual owed S.C. income tax, officials said.

An additional $16,000 came from someone who had collected pension earnings from a company in another state and wasn’t reporting those earnings on his S.C. income tax, officials said.

Officials stress not every noncomplier is a tax cheat. Most make math mistakes or genuinely do not understand how much taxes they owe.

Maybank knows some people might resent his department’s new computer. But most will like it, he said.

“The only thing that Joe Six-Pack hates more than paying taxes is knowing that his neighbor has not paid his,” Maybank said.

Asked whether he’s got a nickname — like Jaws or Predator — for the new computer, Maybank said, “If we had a nickname, it would be something like ‘Fair Share and Not a Penny More.’”