1. What’s New to Help Prevent Fraud In Kansas Kansas Department of Revenue Compliance Enforcement

2. 2 New Legislation Kansas Department of Revenue Joins the Suspicious Filer Exchange Program New System Controls

3. 3 The 2006 Kansas Legislature passed two important bills which will assist in the prevention of fraud in the State of Kansas : House Bill 2772 Intentional Misclassification of Employees Senate Bill 432, Sec. 7 W2-1099’s filed electronically if 51 or More Employees

4. 4 House Bill 2772 – Misclassification of workers Intentional Misclassification of “Employee” as Independent Contractor” is now against the Law. Joint Program with Kansas Department of Labor and Kansas Department of Revenue Authority to share information when misclassification suspected. Effective July 1, 2006

5. 5 House Bill 2772 – Misclassification of workers  Kansas Department of Labor will make Determination  Employee vs Independent contractor.  Penalties imposed did not change with the implementation of this law  Work with Employers and Employees  Work with Both Parties to investigate complaints  Public Education to begin in the High growth communities where misclassification was reported prior to the law.

6. 6 House Bill 2772 – Misclassification of workers  Compliance initiatives that will be taking place.  A Joint Committee established between the Kansas Department of Revenue and the Kansas Department of Labor  A Web-page developed that provides education, links to both Kansas Departments and a location for reporting misclassification  www.kdor.org/misclass  Collaboration, information sharing between Kansas Department of Revenue and Kansas Department of Labor through a share security database for investigation tracking and reporting.

7. 7 Senate Bill 432, Sec. 7 Amended – W2 electronically Every employer, payer, person or organization files statements which report such withholding information for 51 or more employees or payees, the statements shall be filed by electronic means. Effective January 1, 2007 for the tax filing year of 2006.

8. 8 Senate Bill 432, Sec. 7 Amended – W2 electronically  Compliance initiatives that will be taking place.  W2 matching program against filed returns  This will allow the Department of Revenue to discover possible non- filers  Identify misuse of social security numbers  1099 matching program against filed returns.  Misclassification of workers

9. 9 Suspicious Filer Exchange Program Kansas joined the suspicious filer exchange program this year. Faster Secured Communications between states on suspicious filers Updates on current fraud cases that are affecting most states Early notification of possible tax schemes 32 states participating currently in this program Additional information on this program can be located on the tax exchange webpage www.taxexchange.org

10. 10 Suspicious Filer Exchange Program MSATA Participating States: Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma Other Participating States: Alabama, Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Wisconsin

11. 11 New System Controls  Suspicious ABA and Bank account numbers  Reference database in the up front process (business edits) for matching against electronic returns.  Suspicious Tax Prepares  Reference database in the upfront process for matching against all returns filed  3 or more refunds going to the same ABA and Bank account number.  5 or more refunds going to the same address.  Tips Database – logging and tracking all non-compliance tips received by the Kansas Department of Revenue.

12. Thank you! Bev Ries Fraud Investigation Manager Civil Tax Enforcement Compliance Enforcement Bev_Ries@kdor.state.ks.us Kansas Department of Revenue