GOVERNMENT TECHNOLOGY/Electronic tax systems ease filing
Tax filing is not typically convenient, efficient or easy. In fact, most systems are so antiquated that they mystify the average taxpayer. In an effort to clarify the tax filing process for both taxpayers and tax collectors, many government agencies are working to transform their manual systems to electronic ones.
According to Dataquest Worldwide IT Services, a research arm of the Stamford, Conn.-based Gartner Group, spending on electronic tax and revenue systems by state and local governments is expected to grow from $552 million in 1999 to $972 million in 2004. And by 2006, local governments are expected to collect $84 billion in fees and taxes online, according to Cambridge, Mass.-based Forrester Research.
Electronic tax filing has grown at a steady pace over the past few years because it increases convenience, speeds refunds and payments, and lowers processing costs for agencies. The benefits of using automated systems instead of manual systems are clear for government: the labor costs associated with manual entry of tax data are dramatically lowered; human error in data input and storage is eliminated; and the time it takes to process tax returns is decreased. Furthermore, putting tax systems online provides a clear data trail that eliminates cases of misplaced records or erroneous information.
Specific evidence of the benefits of electronic tax filing can be seen in the case of Cincinnati’s employer tax withholding system. Last year, the city’s Income Tax Bureau wanted to develop a filing system for employers that would decrease paper-processing costs and improve the accuracy of the 300,000 withholding filings it handles annually.
The bureau wanted to streamline the filing process by offering several ways – including fax, phone or Internet – for employers to access the electronic system. It also wanted to increase the number of audits it could conduct while reducing the time it took to deposit the tax liabilities into the city’s account.
Prior to using the electronic system, employers filed monthly or quarterly withholding forms and mailed checks for their tax liabilities. The paper-based system required a minimum of four tax bureau staff members to process one tax filing. A person in the mailroom opened the filing, a researcher located missing information, a cashier processed the filing and a clerk put the document in storage. Now, with the automated system, the bureau requires only one person to complete the process, and the other employees are free to complete audits.
Cincinnati’s automated tax filing enables businesses to download tax-withholding forms from the bureau’s web site (www.rcc.org/CityTax/) and file the forms via fax, touch-tone phone or the Internet. Additionally, businesses can make tax liability payments through Electronic Funds Transfer (EFT). Therefore, businesses are able to receive immediate confirmation that their filings have been received by the city and that their tax liabilities have been satisfied.
Currently, about 17,000 of Cincinnati’s 80,000 employers file their tax withholdings electronically. Employers are enjoying significant benefits – including consistent, reliable government service and convenient access to information and processing procedures – from the electronic tax filing system.
Cincinnati’s flexible electronic tax system allows employers to choose the tax filing method that best suits their needs, which was an important consideration for the city’s tax bureau. The electronic tax system is just the latest development in the city’s effort to provide better customer service to its residents.
