[Title Slide]
Data Capture Strategies
for Tax Agencies
Chuck Adelman
FTA Technology Conference 2000
Revenue Direction
Revenue agencies are moving from being paper-intensive
to more electronically-intensive.
1
Revenue Direction
Data Capture Objective
Provide best
possible
customer
service
… while …
Minimizing
operating costs
2
Crossing Channels
Finding the Right Mix
• Start with a comprehensive data
capture strategy
• Establish the value proposition for
each channel
3
Data Capture Options
Four Filing Options
• Electronic filing
• Internet filing
• Telephone filing
• Filing of two-dimensional
barcoded returns
4
Data Capture Options
Electronic Filing
• Filed by tax preparers
• Faster refunds . . .
• . . . but annual taxpayer
costs usually don’t justify
the “float” benefit
5
Data Capture Options
Electronic Filing Costs vs. “Float” Benefits
• Assume a $1,800 tax refund…
• Received one month sooner…
• Deposited in account yielding 6 percent...
$30
$9
Filing Cost
Float Benefit
6
Data Capture Options
Electronic Filing - Cost to Taxpayers
• Assume 500,000 taxpayers for a particular
state file electronically...
• Assume, on average, electronic filing costs a
taxpayer $30/year...
$30
A state’s taxpayers will pay $15,000,000
per year to electronically file their own
returns!
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Data Capture Options
Internet Filing
• 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)
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Data Capture Options
Telephone Filing
• 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
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Data Capture Options
Two-dimensional
Barcoding Returns
• Accommodates taxpayers
more comfortable with
paper returns
• Simple concept; relatively
inexpensive
• Potentially great savings
10
Imaging Approach
An Approach to ImageBased Solutions
• First implement imaging without
intelligent character recognition
(ICR).
• Then introduce limited ICR
capability.
• Finally expand ICR capability
to accommodate all handwritten
returns.
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Potential Cost Savings
Eight Cost Items
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
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Potential Cost Savings
1. Handling, Bursting, and Sorting Mail
Annual Budget: $3,000,000
Annual Volume: 10,000,000
Paper
Returns
Barcode
Returns
$500
$300
$0
Cost per 1,000 returns
Image
Returns
13
Electronic
Returns
Potential Cost Savings
2. Processing and Depositing Checks
Annual Budget: $5,000,000
Annual Volume: 5,000,000
Paper
Returns
Barcode
Returns
$2,000
$1,000
$0
Cost per 1,000 returns
Image
Returns
14
Electronic
Returns
Potential Cost Savings
3. Balancing Returns and Solving Errors
Annual Budget: $2,000,000
Annual Volume: 8,000,000
Paper
Returns
Barcode
Returns
$500
$250
$0
Cost per 1,000 returns
Image
Returns
15
Electronic
Returns
Potential Cost Savings
4. Keying Returns
Annual Budget: $4,000,000
Annual Volume: 8,000,000
Paper
Returns
Barcode
Returns
$500
$100
$0
Cost per 1,000 returns
Image
Returns
16
Electronic
Returns
Potential Cost Savings
5. Correcting Math and Keying Errors
Annual Budget: $6,000,000
Annual Volume: 2,000,000
Paper
Returns
Barcode
Returns
$3,000
$1,500
$150
$0
Cost per 1,000 returns
Image
Returns
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Electronic
Returns
Potential Cost Savings
6. Tracking Receivable Returns
Annual Budget: $10,000,000
Annual Volume: 1,000,000
Paper
Returns
Barcode
Returns
$10,000
$5,000
$500
$0
Cost per 1,000 returns
Image
Returns
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Electronic
Returns
Potential Cost Savings
7. Resolving Purification Issues Due to Keying Errors
Annual Budget: $2,000,000
Annual Volume: 8,000,000
Paper
Returns
Barcode
Returns
$250
$125
$0
Cost per 1,000 returns
Image
Returns
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Electronic
Returns
Potential Cost Savings
8. Retaining Paper Returns
Annual Budget: $2,000,000
Annual Volume: 10,000,000
Paper
Returns
Barcode
Returns
$400
$200
$0
Cost per 1,000 returns
Image
Returns
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Electronic
Returns
Potential Cost Savings
Channel
Currently
Year 1
Year 2
Year 3
Data Entry
1,500
1,315
1,100
775
2D Barcode
0
50
100
200
Telephone
0
50
100
200
eFiling
500
600
700
800
Internet
0
10
50
100
2,000
2,025
2,050
2,075
Total Volume
Comparative
Cost
$23.3M $20.5M $17.3M $12.5M
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Business Taxes
Make Sure You Include
Business Tax Processing
Into Your Data Capture
Strategy
• Accounts for half of volume
• Business taxpayer base is much
more stable than individual
taxpayer base
• Steadier network volumes
• Greater state control
22
Questions
Chuck D. Adelman
(973) 301-4445
[email protected]
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