The states' push towards e-filing of tax returns is working as electronic filings increased by about 16 percent. By making it easier to file your taxes and get refunds more quickly, the move to digital is improving citizens' feeling about dealing with their government, says Dibya Sarkar in Federal Computer Week.
As states accrue financial benefits via modernized tax systems, experts add that the new investments will help state tax agencies become more customer-friendly, electronically progressive organizations instead of paper-processing factories.
Public and business taxpayers are driving such efforts. “The citizen wants to interact — at least to the extent they want to interact with the government and a tax agency — they want to interact electronically,” said Harley Duncan, executive director of the Federation of Tax Administrators, a national membership association composed of the principal state tax collection agencies.
But the real benefits of the digital revenue service may come in collections not PR.
States are becoming more sophisticated in chasing scofflaws, and some have tried predictive modeling techniques. Such approaches aggregate and analyze data from different sources to determine which groups of taxpayers are more likely to pay a bill and which groups might require further persuasion. The techniques help align collection methods with available resources, experts say.
Ann Rettie, managing partner of Accenture’s revenue and customs practice, said insurance companies have used predictive modeling for a while to calculate risk, and financial institutions have used it to get credit ratings on applicants. She said the same general principles apply to public-sector tax revenue.
“If someone misses a payment, it could be just that someone didn’t understand the directions, it’s a new type of tax for them or they could be a habitual offender,” she said. “This kind of data analytics helps you understand that and predict where your problems are likely to be in terms of groups of taxpayers.”
Joe Milack, an Accenture director who specializes in compliance and analytics, said such data can help state tax administrators pick the most effective collection approach. “For instance, someone who has a very high likelihood of paying doesn’t need much more [than] a collection letter, whereas someone who has a lesser score might need a telephone call,” Milack said. “You’re not going to overburden the taxpayer with some enforcement action that’s not necessary.”
Ultimately, states need to upgrade their backend systems and integrate all their systems together.
[F]orward-looking states consider integrated tax systems to be critical to state governments’ overall financial health. Integrated tax systems can link revenue systems with budgeting or customer relationship management applications, for example, or integrate financial systems among departments.
South Carolina, for instance, has issued a request for proposals to create an integrated tax system. Garon said the state wants to integrate older systems to provide complete profiles of business or individual tax filers. The system would improve the department’s case management operations, allowing auditors to view filers’ payments across different types of taxes, correspond with filers and see other documents in real time. “Today, it’s very difficult to do that,” he said.