[Title Slide]

Data Capture Strategies

for Tax Agencies Chuck Adelman

FTA Technology Conference 2000

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Revenue agencies are moving from being paper-intensive to more electronically-intensive.

Revenue Direction

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Provide best possible customer service

Data Capture Objective

Minimizing operating costs

… while …

Revenue Direction

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Crossing Channels

• Start with a comprehensive data capture strategy

• Establish the value proposition for each channel

Finding the Right Mix

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Data Capture Options

• Electronic filing

• Internet filing

• Telephone filing

• Filing of two-dimensionalbarcoded returns

Four Filing Options

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Data Capture Options

• Filed by tax preparers

• Faster refunds . . .

• . . . but annual taxpayer costs usually don’t justify the “float” benefit

Electronic Filing

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Electronic Filing Costs vs. “Float” Benefits

• Assume a $1,800 tax refund…

• Received one month sooner…

• Deposited in account yielding 6 percent...

$30

$9

Float BenefitFiling Cost

Data Capture Options

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Electronic Filing - Cost to Taxpayers

• Assume 500,000 taxpayers for a particular state file electronically...

$30

Data Capture Options

A state’s taxpayers will pay $15,000,000 per year to electronically file their own returns!

• Assume, on average, electronic filing costs a taxpayer $30/year...

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Data Capture Options

• Free to taxpayers

• No need to leave home to file

• Significantly cheaper than paper-based returns

• Changes not required to states’ legacy systems (if using Fed/State approach)

Internet Filing

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Data Capture Options

• Free to taxpayers; no need to leave home to file; fast refunds

• Ubiquity of telephone access vs. Internet

• Issues: address changes, large returns, hard copy

Telephone Filing

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Data Capture Options

• Accommodates taxpayers more comfortable with paper returns

• Simple concept; relatively inexpensive

• Potentially great savings

Two-dimensional Barcoding Returns

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Imaging Approach

• First implement imaging without intelligent character recognition (ICR).

• Then introduce limited ICR capability.

• Finally expand ICR capability to accommodate all handwritten returns.

An Approach to Image-Based Solutions

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1. Handling, bursting, and sorting incoming mail

2. Processing and depositing checks

3. Batch balancing returns and resolving balancing errors

4. Keying return information

5. Resolving taxpayer math errors and keying errors

6. Tracking additional receivable returns caused by errors

7. Resolving purification issues that result from keying errors

8. Retaining or warehousing paper returns

Eight Cost Items

Potential Cost Savings

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$0

$300

$500

Potential Cost Savings

1. Handling, Bursting, and Sorting Mail

Annual Budget: $3,000,000 Annual Volume: 10,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

Cost per 1,000 returns

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$0

$1,000

$2,000

2. Processing and Depositing Checks

Annual Budget: $5,000,000 Annual Volume: 5,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

Cost per 1,000 returns

Potential Cost Savings

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$0

$250

$500

3. Balancing Returns and Solving Errors

Annual Budget: $2,000,000 Annual Volume: 8,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

Cost per 1,000 returns

Potential Cost Savings

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$0

$100

$500

4. Keying Returns

Annual Budget: $4,000,000 Annual Volume: 8,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

Cost per 1,000 returns

Potential Cost Savings

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$0

$1,500

$3,000

5. Correcting Math and Keying Errors

Annual Budget: $6,000,000 Annual Volume: 2,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

$150

Cost per 1,000 returns

Potential Cost Savings

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$0

$5,000

$10,000

6. Tracking Receivable Returns

Annual Budget: $10,000,000 Annual Volume: 1,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

$500

Cost per 1,000 returns

Potential Cost Savings

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$0

$125

$250

7. Resolving Purification Issues Due to Keying Errors

Annual Budget: $2,000,000 Annual Volume: 8,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

Cost per 1,000 returns

Potential Cost Savings

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$0

$200

$400

8. Retaining Paper Returns

Annual Budget: $2,000,000 Annual Volume: 10,000,000

Paper Returns

ImageReturns

BarcodeReturns

ElectronicReturns

Cost per 1,000 returns

Potential Cost Savings

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Potential Cost Savings

Year 3

775

200

200

800

100

2,075

$12.5M

Year 2

1,100

100

100

700

50

2,050

$17.3M

Year 1

1,315

50

50

600

10

2,025

$20.5M

Currently

1,500

0

0

500

0

2,000

$23.3M

Channel

Data Entry

2D Barcode

Telephone

eFiling

Internet

Total Volume

Comparative

Cost

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• Accounts for half of volume

• Business taxpayer base is much more stable than individual taxpayer base

• Steadier network volumes

• Greater state control

Make Sure You Include Business Tax Processing Into Your Data Capture Strategy

Business Taxes

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Chuck D. Adelman

(973) 301-4445

chuck.d.adelman@ac.com

Questions