1. [Title Slide] Data Capture Strategies for Tax Agencies Chuck Adelman FTA Technology Conference 2000

2. 1 Revenue agencies are moving from being paper-intensive to more electronically-intensive. Revenue Direction

3. 2 Provide best possible customer service Data Capture Objective Minimizing operating costs … while … Revenue Direction

4. 3 Crossing Channels Start with a comprehensive data capture strategy Establish the value proposition for each channel Finding the Right Mix

5. 4 Data Capture Options Electronic filing Internet filing Telephone filing Filing of two-dimensional barcoded returns Four Filing Options

6. 5 Data Capture Options Filed by tax preparers Faster refunds...... but annual taxpayer costs usually don’t justify the “float” benefit Electronic Filing

7. 6 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

8. 7 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...

9. 8 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

10. 9 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

11. 10 Data Capture Options Accommodates taxpayers more comfortable with paper returns Simple concept; relatively inexpensive Potentially great savings Two-dimensional Barcoding Returns

12. 11 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

13. 12 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

14. 13 $0 $300 $500 Potential Cost Savings 1. Handling, Bursting, and Sorting Mail Annual Budget: $3,000,000Annual Volume: 10,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns Cost per 1,000 returns

15. 14 $0 $1,000 $2,000 2. Processing and Depositing Checks Annual Budget: $5,000,000Annual Volume: 5,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns Cost per 1,000 returns Potential Cost Savings

16. 15 $0 $250 $500 3. Balancing Returns and Solving Errors Annual Budget: $2,000,000Annual Volume: 8,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns Cost per 1,000 returns Potential Cost Savings

17. 16 $0 $100 $500 4. Keying Returns Annual Budget: $4,000,000Annual Volume: 8,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns Cost per 1,000 returns Potential Cost Savings

18. 17 $0 $1,500 $3,000 5. Correcting Math and Keying Errors Annual Budget: $6,000,000Annual Volume: 2,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns $150 Cost per 1,000 returns Potential Cost Savings

19. 18 $0 $5,000 $10,000 6. Tracking Receivable Returns Annual Budget: $10,000,000Annual Volume: 1,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns $500 Cost per 1,000 returns Potential Cost Savings

20. 19 $0 $125 $250 7. Resolving Purification Issues Due to Keying Errors Annual Budget: $2,000,000Annual Volume: 8,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns Cost per 1,000 returns Potential Cost Savings

21. 20 $0 $200 $400 8. Retaining Paper Returns Annual Budget: $2,000,000Annual Volume: 10,000,000 Paper Returns Image Returns Barcode Returns Electronic Returns Cost per 1,000 returns Potential Cost Savings

22. 21 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

23. 22 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

24. 23 Chuck D. Adelman (973) 301-4445 chuck.d.adelman@ac.com Questions