How the State of California Locates Taxpayers and Their Assets


The next thing I would like to talk to you about is how the State of California locates taxpayers and their assets. State collection agents have gotten a lot more creative and have access to a lot more information than they did in the past. Part of the reason they have access to this information is because most of the records now within the state are electronic and there is a lot more information sharing between agencies, both within the State of California government and outside of the State of California. So first, the principal collection tool that the state uses for collections is the internet. So, the very first thing they do is usually run a Google search on you or your business, to try and locate the – they try and locate any information that they can on you. Interesting to note that state collection agents use a lot of social media. So, Facebook is common. Twitter is common. Yelp is common for businesses and some states can pull a variety of information that is publicly available on the internet and use that for collections purposes, which is really interesting. The next source of information that the state usually goes to is the internal databases that both the collection agency itself and the broader State of California main tax. So, for example, you’ve got a Franchise Tax Board state income tax person collecting on a delinquent liability. They can go to the Employment Development Department in California to get a copy of taxpayer’s wages and work information. They can go to the California DMV to get a copy of their driver’s license and last known address. They can look through the California voter registration system. All of this information is really easily available and really easily accessible to state collection agents. The other information they can pull is they can pull information from credit reporting agencies. So, a lot of the times, what state collection agents will do to locate assets in particular is they will pull your most recent credit report. So, if you’ve applied for a credit card recently or listed an address or things like that, the state agent can pull all of that off the credit card information. When state records fail or when the credit report doesn’t reveal anything, a lot of the times, the state collection agent will do a records request through the Internal Revenue Service. So, anything that is reported to the Internal Revenue Service is fair game for state collection agents. This includes wage information. This includes information from 1099s or state tax refunds in other states. It includes interest associated with bank accounts. So, banks will file third party 1099-INTs for interest that is earned; 1098s for student loan information and a variety of – the treasure trove of information that the IRS collects on taxpayers. The state through interagency records requests can get a hold of that information and often uses it to locate taxpayers and their assets. In addition to the IRS and gaining information through them, the state also uses the federal postal system as a means of getting updated addresses and things like that. So, a lot of the times, state collection agents can request to do a mail cover, which is where they – the post office keeps track of any letters that you have mailed with any forwarding address on. The state can obtain updated address information through the post office as a means of tracking you down. In addition, the state has something – has access to something called the Financial Institution Records Match Program. So, the state can send out a request with your first name and your last name or your business name or the last four or your Social Security number and try and run that through a database of banks in order to track down any financial institution accounts that you might have. So, they do that, number one, to locate assets; and number two, to locate you physically and track you down. So, all these sources of information are readily available to state collection agents and it’s one of the ways they help try and close the tax gap. They do pretty thorough asset investigations on most taxpayers and that’s why a lot of the times down the road, even if the taxpayer has moved out of state or hasn’t had any work history or anything like that, that’s how the state is able to locate them and track down their assets for collections purposes. Up next


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law