NEW YORK (CNNMoney.com) -- Thanks to IBM, collecting billions of dollars of delinquent tax debt has just gotten a little easier for at least one state.
New York has been testing a new program since December that maximizes the total amount of debt the state can recoup.
State tax agencies and budget experts estimate that lost revenue from tax deadbeats averages out to billions of dollars a year per state. At the federal level, the Internal Revenue Service estimates delinquent tax debts amounted to about $300 billion in 2008.
Last year, overall state tax collections fell by 9%, according to the Census Bureau. Meanwhile, state budget shortfalls are expected to rise 78% from 2009, according to the Center on Budget and Policy Priorities.
After slashing their budgets, many states have fewer resources to collect debts.
Typically, states either send letters, make phone calls or send a debt collector to knock on the offender's door -- an inefficient process.
"It's not just that states' revenue needs have gotten greater, the amount of data they collect is greater too [and] they just don't have the tools to take full advantage of that data," said Terence Lutes, director of global revenue management at IBM.
IBM's Tax Collections Optimizer looks at each delinquent taxpayer's profile and cross analyzes it with a database of New York's millions of prior offenders. Matching each profile with past similar cases, the system analyzes what actions resulted in the most amount of money collected in the shortest amount of time for the lowest cost to the state.
IBM's program searches through filing histories, income patterns, occupations and bankruptcy filings, among other data points.
"We have been doing everything we can to create the mind set for taxpayers that the chances of getting caught are greater now than ever before with the use of analytics," said Bill Comiskey, deputy commissioner of enforcement at the New York Department of Taxation and Finance. "We're hoping more people will do the right thing."
The state had already been collaborating with IBM for more than a decade on another technology called the Tax Audit and Compliance System, which used similar analytics to identify questionable refund claims. Since 2004, IBM's technology has saved New York from losing more than $1 billion, according to state officials.
New York isn't stopping there: The state plans to work with IBM to analyze and collect lost sales taxes from businesses, which amount to billions of lost revenue every year.
IBM's technology doesn't come cheap. New York said the system cost them between $5 million and $10 million to purchase and implement. In order to afford the new program, the state increased its tax agency's collections budget by 20% over the past year. With states' budget problems, the price tag might still be too steep for some.
Still, IBM's Lutes said the return on investment will happen "really, really quickly" for states that use its technology. New York said it predicts the program will save the state $100 million over the first three years of implementation. It expects that figure to rise after a few years, since the system improves as it collects more data.
New York is currently the only state using IBM's new technology but the company says the program can be easily used by other states as well as foreign governments.
While some states have been able to stop delinquencies from rising, there is still a growing need to collect tax debts "as states face growing budget gaps," said Kim Rueben, public finance economist at the Urban Institute.
Other states have currently been using different methods to track down deadbeats. Many recently instituted amnesty programs that forgive older debts if delinquent taxpayers pay off their more recent ones. That has gotten more people back in the system, and once they're back in, they tend to stay there, according to Rueben.
In addition to the other methods already being used by states, IBM's new technology may provide an attractive option because many of those states lack the same resources as the federal government, said Rueben.
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