Arizona Individual Income Tax Returns  More than 2.6 million individual income tax returns received by ADOR for a tax year  Paper, e-file and 2D bar code  Resident (140, 140a, 140ez), non-resident returns (140nr) and part-year returns (140py)  Growth in e-filed returns  Approximately 70% of individual income tax returns were e-filed for tax year 2012  E-file just over 50% of all returns in tax year 2007

ADOR IIT Enforcement Efforts  Over 95% of Individual Income Tax Audits are directly linked to information received from the IRS.  Identify Non-filers  Compare differences between state and federal returns  Other Audit leads  FY 13 – approx. 65,000 IIT audits  FY 13 – approx. $30M in Audit Assessments  FY 13 – approx. $21M in Collections

Individual Income Tax Data  Arizona individual income tax data  E-file and 2D bar code returns – capture primary fields plus Detail on additions to income, subtractions from income, exemptions, adjustments to itemized deductions (Arizona schedule A) and credits  Paper returns – capture primary fields  Limitations of Arizona data  Data is limited depending on how return was filed (paper vs. e-file/2D)  Additional data available from e-file/2D bar code returns

Individual Income Tax Data  Federal individual income tax data for Arizona filers  IRS federal information sharing program – strict limitations on federal data  IRS Statistics of Income (SOI) – summary of various federal income tax return data; also provided at the state level  Limitations of Federal data  Lag in data availability – first look at tax year 2012 would be fall 2013, but does not contain a full tax year at that point – available following fall 2014  First look at IRS SOI data by state – tax year 2012 released spring 2014; estimates based on samples

Individual Income Tax Model  Individual income tax model simulates the state tax for the total return population given:  Changes in federal law  Changes in state data due to federal law  And/or proposed state changes  Returns in the sample contain federal information from IRS and data provided on Arizona returns  Model output provide values for additions, subtractions, exemptions, and deductions for a tax year  The impact of credits are not included in the model due to the unpredictability of taxpayer behavior  Current model contains tax year 2006 data grown to represent tax year 2013

Summary of Individual Income Tax Data  Arizona data  Primary fields – summary of all return data  Detail on additions/subtractions/adjustments to itemized deductions – from model  Credits Pull returns to capture data; process to compile data from e- file/2D has improved Larger volume credits – use reports from outside sources (Public School extracurricular report/STO annual report)  Federal data for Arizona filers  Components of income/additions/subtractions/exemptions/ itemized deductions Federal SOI or from model

ADOR Reports  ADOR Annual Report – provides summary data on all tax types administered by the Department  Tax Expenditure Report – summary of state tax expenditures (exemptions, deductions, exclusions and credits) and estimated costs where available  Individual Income Tax Statistics – individual income tax data compiled by state, county and city levels  Arizona Income Tax Credits – summary of individual and corporate income tax credits  Tax Facts – summary of monthly tax revenue data

Individual Income Tax Data and Sources  Primary return data – Individual Income Tax Statistics (summary of return data)  Federal subtractions from income – Tax Expenditure Report (model)  Arizona exemptions – Tax Expenditure Report (model)  Arizona subtractions from income – Tax Expenditure Report (model)  Standard and Itemized Deductions - Tax Expenditure Report (model)  Credits – Tax Expenditure Report & Income Tax Credit Report, (return research, reports from outside sources)