The checks are almost in the mail

The checks are almost in the mail

Agencies race against the clock to rewrite tax application and process special refund checks


Combining their systems know-how, four agencies are spending $115.8 million to pay out $40 billion in special tax refunds conceived of by President Bush and mandated by Congress.

Tony Torrice
FMS' Tony Torrice holds a specimen of a tax refund check. Working with the IRS, DFAS and USPS, his agency soon will mail 130 million checks worth a total of $40 billion.
About 20 members of an interagency task force from the IRS, Financial Management Service, Postal Service, and Defense Finance and Accounting Service are rushing to mail refunds by September for calendar 2000 to most of America's 130 million taxpayers. The Economic Growth and Tax Relief Reconciliation Act of 2001, passed in May, set the project in motion.

The task force must verify addresses, calculate refund amounts and get the checks in the mail. Any outstanding federal debt must be subtracted from each individual's refund.

Because the president had begun promoting the special refunds soon after taking office, the task force agencies were able to ramp up their operations quickly, said Tony Torrice, FMS' chief disbursing officer.

'Before the legislation passed, we were formulating our plans,' he said.

FMS and DFAS are setting up eight disbursing and debt centers around the country to mail 11 million checks a week.

Big spender

Of the $115.8 million budget, the IRS will spend $66.2 million. Most of that will go to a contractor to notify taxpayers about their refunds.

Torrice said the rest of the budget'about $49 million'will buy paper, labor, machinery maintenance and postage.

The postage alone will cost $40 million.

'This is less than 40 cents an item,' Torrice said. 'It's mostly postage.'

The IRS will use a Postal Service address database that USPS updates weekly.

The contractor this week will start sending IRS notices to half of the nation's taxpayers relaying how much of a refund, if any, they'll receive.

The IRS' calculations will be printed on the back, and the notice will explain to people ineligible for a 2000 refund that they may be able to claim it on next year's return.

The second half of the refund notices will be mailed next week.

FMS in the meantime is gearing up to cut the checks. The complex process begins within the IRS' core financial system, the Automated Financial System/Federal Financial System (AFS/FFS), running on an IBM System/390 mainframe.

Weekly address updates from the Postal Service's National Change of Address System will be fed directly into AFS/FFS.

Meanwhile, the IRS will calculate refunds using its Interim Revenue Accounting and Control System. IRACS has an IBM DB2 database management system.

At the core

IRACS interacts with the core financial system as well as with FMS' Government Online Accounting Link system, among other FMS systems.

GOAL runs on an FMS mainframe's logical partition under IBM's OS/390. It provides the audit trail.

'Anytime a payment is issued, there are certain transactions, and they have to be accounted for,' said John Kopec, executive director for platform services at FMS. 'There has to be an audit trail.'

Secure and direct

Over a direct T1 connection with Triple Data Encryption Standard security, the IRS then transmits the name, address and refund amount for each taxpayer to FMS' dedicated private network, FMS-Net.

FMS verifies that each taxpayer's information has come from the IRS via the Connect:Direct electronic-commerce application for OS/390, from Sterling Commerce of Dublin, Ohio.

Refund Diagram

'That gives us surety of the identity of the information's origin,' Kopec said.

FMS then processes the information on its proprietary payment system in Hyattsville, Md.

The agency runs each payment file separately against the Tax Refund Offset Program created to manage the refunds on high-end IBM RS/6000 servers, Kopec said.

The offset program subtracts any outstanding debts for child support or education loans from the amount to be refunded.

'Then we create the print files that go to the distribution centers,' Kopec said.

The distribution centers have dedicated T1 lines with built-in redundancy, again using Connect:Direct to verify that the data is coming directly from FMS.

At the distribution centers, RS/6000 servers 'drive big IBM printers that write the checks,' Kopec said.

Five of the centers are operated by FMS in Austin, Texas; Birmingham, Ala.; Kansas City, Mo.; Philadelphia; and San Francisco.

The other three, run by DFAS, are in Columbus, Ohio, Denver and Indianapolis.
FMS will deal with any returned checks.

It will transmit the names and addresses back to the IRS, which will then note that they were uncashed.

Taxpayers will have 90 days to reclaim the checks before the distribution centers shred them.

Later on

The uncashed amounts will be added to the taxpayers' accounts for the following year, or taxpayers can contact the IRS to have checks reissued.

Alvina McHale, FMS' public affairs director, said people figuratively cash tax refund checks before receiving them.

'They'll be cashing it in their hearts and minds long before,' she said. 'They're spending it before they get it.'

FMS expects that 5 million to 10 million of the checks will not be cashed. That won't have much effect on the $115.8 million cost of issuing the refunds, however.

'Once they're in the mailboxes, the major costs have occurred,' McHale said.

At the end of 2000, the IRS reported getting back $68.3 million worth of undeliverable refund checks for 1999.

A tax refund for a deceased taxpayer will go to whoever is controlling the estate or will be credited to the deceased person's estate.

Routine problem

If a taxpayer's refund is stolen and cashed by someone else, the taxpayer can contact the IRS, which contacts FMS, which turns the matter over to the Secret Service.

'This happens all the time,' McHale said. 'We have a whole claims department.'


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