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1 Collections, Predictive Analytics and Taxpayer Compliance Management John McCalden McCalden Consulting

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Presentation on theme: "1 Collections, Predictive Analytics and Taxpayer Compliance Management John McCalden McCalden Consulting"— Presentation transcript:

1 1 Collections, Predictive Analytics and Taxpayer Compliance Management John McCalden McCalden Consulting

2 2 Agenda Some Collection Theory Decision Analytics Taxpayer Compliance Management Q & A

3 3 Percent of Cases Aging per Month (SC) 0% 20% 40% 60% 80% 100% Age in Months Percent Source: South Carolina ARMS

4 4 Percent of Cases Aging per Month (SC) y = x R 2 = % 20% 40% 60% 80% 100% Age in Months Percent Power ( )

5 5 Collection Rates, Based on Different Levels of Performance 0% 20% 40% 60% 80% 100% Age in Months Percent Remaining Forecast: -0.2Forecast; -0.5Forecast: Forecast: -1.0Forecast: -2.0 Forecast: -0.7

6 6 Effect of Raising the Level of Performance From to % 20% 40% 60% 80% 100% Age in Months Percent Remaining Forecast -0.7 y = 1x -0.7 R 2 = 1 y = 1x R 2 = 1

7 7 Average Balance by Age of Case y = Ln(x) R 2 = $0 $500 $1,000 $1,500 $2,000 $2, Months Average Balance ($) Average Per CaseLog. (Average Per Case) Source: South Carolina ARMS: Summary Receivables Report 12/31/2004 y = Ln(x) R 2 =

8 8 Application of Aging Curve ( ) and Average Balance Curve to a Hypothetical Cohort of 10,000 Cases Month Aging Cases Model 1 Total $ Model $5,763, $4,963, $4,056, $3,171, $2,705, $2,403, $2,022, $1,784, $1,614,037

9 9 Percent of # and $ Collected, per Month of Aging 0% 20% 40% 60% 80% 100% Age in Months Percent Collected % # Collected 1% $ Collected 1

10 10 Comparison of Percent of # and $ Collected, per Month of Aging

11 11 Hypothetical Improvement in Collections When Exponent Increases From to -0.7 Month Aging Cases Model 1 Total $ Model 1 Aging Cases Model 2 Total $ Model 2 # Difference $ # Improvement $ $5,763, $5,763,1000$00.00% 35010$4,963, $4,592,230375$371, %6.45% 63239$4,056, $3,572,724386$483, %8.39% $3,171, $2,658,173339$513, %8.90% $2,705, $2,203,419301$501, %8.71% $2,403, $1,919,059273$484, %8.41% $2,022,712814$1,569,578235$453, %7.86% 48876$1,784,201665$1,354,445211$429, %7.46% 60761$1,614,037569$1,206,816192$407, %7.07%

12 12 How Do We Transition to a Higher Level of Performance? 0% 20% 40% 60% 80% 100% Age in Months Percent Remaining Forecast -0.7 y = 1x -0.7 R 2 = 1 y = 1x R 2 = 1

13 13 Use Decision Analytics!! Use Information Intelligently to Make Business Decisions: Optimize Collection Activity Prioritize Audit Candidates Supply Education to the Needy! And Repeat (Taxpayer Compliance Management Program!)

14 14 How Do We Use Information Intelligently? Forecast Performance (models) Appropriate Actions (decision strategies/treatment scenarios) Controlled Experiments (champion/challenger) Performance Reporting

15 15 Actual and Forecast 'Good' Probabilities for Repeat Filers (SC)

16 16

17 17 Treatment Scenarios Allow low-risk cases to self-cure Accelerate high-risk cases to enforced collection actions Focus collector resource on medium-risk cases All scenarios end with enforced collection actions

18 18 Low-Risk Treatment Scenarios (SC)

19 19 Medium-Risk Treatment Scenarios (SC)

20 20 High-Risk Treatment Scenarios (SC)

21 21 Treatment Scenarios in MA (Initial Design) Treatment A [Med.Risk] (High Balance) NOA Phone Auto- Research Call&RP (trustee) NOD FN&Call& RP Deem Auto-Levy Open or Assets Field FRAuto-LevyOCA Treatment B [High Risk] (Low Balance) Bus. NOA Phone Auto- Research NODNIL Auto-Levy Open or Assets FRAuto-LevyOCA Assign LIEN FN Call RP NOA Phone Auto- Research NODNIL Auto-Levy Wage Levy Wage LevyLIEN Case FR LIEN Auto-LevyOCA Case Assigned Day 1 30 Day 45 Day 61 Day 90 Day 97 Day 105 Day 111 Yes No Yes No Yes No Treatment C [High Risk] (High Balance) (Low Balance) Ind. Treatment D [High Risk] (High Balance) Bus. NOA Phone Auto- Research NOD Open or Assets FRAuto-LevyOCA LIEN Field FN Call Deem RP Yes No Call RP-Propose Day 2 14 Treatment E (Very High Balance) Ind. NOA Call Assign Treatment F (Very High Balance) Bus. NOA Call Assign Low Med High Low Med High

22 22 Champion-Challenger Evaluation Primary Primary Challenger 1 Challenger 1 90%Grossed Up 10% Grossed Up $ Available$450$500$50 $500 $ Collected$ 90$100$11 $110 Collection % 20%20%22% 22%

23 State Tax Revenue Source: FTA Web Site :- U.S. Bureau of the Census and Bureau of Economic Anaylsis.

24 24 Probability of Making an Assessment – PA Data < Score Range Probability Actual Forecast

25 25 Sort Candidates by Cell and Probability (PA) cum_ Obs hours cum_yield myrank

26 26 Collection Action Transition Probabilities (Markov-Chain Analysis) FTF Notice AssessmentPayment Plan LevyLienField VisitRevokeSeizeResponsible Party Cure New FTF Notice Notice of Assessment 0.20 Assessment Payment Plan Levy 0.60 Lien 0.70 Field Visit 0.40 Revoke 0.10 Seize 0.50 Responsible Party 0.80 From To

27 27 Probability of Curing by Age of CE and Type of Collection Action

28 28 Inbound Information Channels Customer/Taxpayer Information Sources Tax Processing External Sources Customer Contact History Billing History Detailed Return Data Payment History Filing History & Methods Other A/R History Original Registration Data Registration Status Updates Federal Return Data RAR, CP2000 Fed Audits Industry Trend Data SIC Code Standards Other StatesTax Data Credit Bureau Data Other State Agency Data Taxpayer Interactions Phone Calls Letters Returns E-File Telefile Internet Imaged Payments Electronic Internet Imaged Office Visits Case Management Contact Recording Federal Data Sharing Programs External Interfaces RESPONSETREATMENT TAXPAYER COMPLIANCE MANAGEMENT Decision Information Outbound Information Channels Phone Calls Letters Office Visits WEB site Field Visits Faxes Mailings Other? Customer Contact Delivery Systems Integrated Billing & Correspondence Supporting Systems Audit Caseload Collections Caseload Non-Filer Caseload Education Caseload Autodialer& Intelligent Call Management Case Management and Workflow Compliance Strategy Management Compliance Strategy Decision Engine Integrated Preventative/Curative Strategies Decision Delivery Decisions Education Strategy Registration Guidance Compliance Initiatives Collections Strategy Non - Filer Strategy Audit Strategy Challenger Strategy Compliance Referral Generation Compliance Management Initiatives Reusable Referral Generation Utilities Referrals Under-reporters Compliance initiatives Non-Filers Educational needs Non-payers Compliance Data Warehouse Acquisition & Cleansing Create/Add to Customer Profile Data Mining Customer Profile Database Data Aggregation/ Performance Summary Extracts Events Performance Reporting Behavior Modeling Performance Tables Populate/Update Data Access Compliance Referral Queue Inbound Information Channels Customer/Taxpayer Information Sources Tax Processing External Sources Customer Contact History Billing History Detailed Return Data Payment History Filing History & Methods Other A/R History Original Registration Data Registration Status Updates Federal Return Data RAR, CP2000 Fed Audits Industry Trend Data SIC Code Standards Other StatesTax Data Credit Bureau Data Other State Agency Data Taxpayer Interactions Phone Calls Letters Returns E-File Telefile Internet Imaged Payments Electronic Internet Imaged Office Visits Case Management Contact Recording Federal Data Sharing Programs External Interfaces RESPONSETREATMENT TAXPAYER COMPLIANCE MANAGEMENT Decision Information Outbound Information Channels Phone Calls Letters Office Visits WEB site Field Visits Faxes Mailings Other? Customer Contact Delivery Systems Integrated Billing & Correspondence Supporting Systems Audit Caseload Collections Caseload Non-Filer Caseload Education Caseload Autodialer& Intelligent Call Management Case Management and Workflow Compliance Strategy Management Compliance Strategy Decision Engine Integrated Preventative/Curative Strategies Decision Delivery Decisions Education Strategy Registration Guidance Compliance Initiatives Collections Strategy Non - Filer Strategy Audit Strategy Challenger Strategy Education Strategy Registration Guidance Compliance Initiatives Collections Strategy Non - Filer Strategy Audit Strategy Challenger Strategy Compliance Referral Generation Compliance Management Initiatives Reusable Referral Generation Utilities Referrals Under-reporters Compliance initiatives Non-Filers Educational needs Non-payers Compliance Data Warehouse Acquisition & Cleansing Create/Add to Customer Profile Data Mining Customer Profile Database Data Aggregation/ Performance Summary Extracts Events Performance Reporting Behavior Modeling Performance Tables Populate/Update Data Access Compliance Referral Queue


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