Idaho automates tax collection

BOSTON ' The Idaho State Tax Commission has taken a number of steps to automate the handling of citizen tax returns. By scanning the documents as soon as possible after they are received, the commission can expedite the handling of the material and offer more services to citizens, explained Steve Miller, administrator of the commission's revenue operations division.

Miller presented an overview of the agency's work at the AIIM [Association for Information and Image Management] International Exposition and Conference held this week in Boston.

The commission has thus far spent about $1.5 million on modernization efforts, though it is expecting to recoup that money in productivity gains within three years.

The commission set out to streamline three tasks. One was the process of getting into the system the paper tax forms and checks that taxpayers submit at field offices. A second program eliminates the need for employees to categorize paper forms by hand by setting up a scanning process and workflow to do the work digitally. A third program, which the state is now undertaking, ingests and reconciles W-2 forms sent through the mail.

The field office project took a few months to complete, and the virtual batching field took less than a year. The agency is now about six months into the deployment of the W-2 ingestion process, Miller said.

Overall, the state has 1.7 taxpayers and about 54,000 retail establishments, all of which pay taxes. The population grew 13.2 percent from 2000 to 2006, and tax revenue grew from $2.3 billion to $3.2 billion.

For the first project, the commission equipped the field offices to scan the forms they received from walk-in traffic. The state has five field offices across two time zones.

Those offices usually take in about $14 million a year in taxes. In years past, the offices would bundle the forms and checks and mail them to the central office. Bundling the forms and checks and filling out the deposit report could take between half an hour and two hours a day. They were processed by hand, so tax returns could take as long as four weeks to process.

Because the state mandated that all checks submitted to state offices be deposited within 24 hours, the commission needed a way to hasten the processing of the tax returns. By scanning these forms early on, they could be processed more quickly.

Workers at these offices did not have expertise in processing checks though, so the plan was to put in a system that would make it easy to capture the information electronically, which then could be sent to central processing, said Laurie Hunter-Manning, an account executive for J and B Software, which helped put together the field systems.

J and B designed a scanning module that consisted of a Dell desktop computer with a touch screen and check scanner. When a taxpayer drops off a form and possibly a check for taxes owed, a worker at the field office scans the material. The electronic versions are then relayed to the central office in Boise, and the checks are taken to the local bank for deposit.

The second project allowed the commission to undertake what Miller called virtual batching.

The commission handles revenue from about 14 different taxes, each with it own set of forms. As the returns came in, personnel would place forms in compartments organized by form type. Then they would route the forms in batches.

The danger in this approach is that employees would mistakenly place forms in the wrong folders. This extended the processing time because forms had to be rerouted when they were found in the wrong locations.

The commission wanted to scan all the forms as soon as they arrived. Then they could be routed electronically based on factors such as tax period, form year, priority, whether a refund or payment was due and so on. This information could be recognized in many cases through bar codes the state placed on the forms or by Intelligent Character Recognition (ICR) software.

In addition to classifying the forms more quickly and eliminating routing mistakes, going electronic also dramatically reduced the storage space required for the paper forms. Although the state cut the time the commission needed to retain paper forms from four years to one, keeping forms even one year required considerable storage. The commission convinced the state legislature to recognize electronic copies as the official record of the form. Miller estimated that electronic storage will eventually save the state $100,000 a year.

The third project, now under way, involves building a system that would reconcile employer and employee W-2s. This task is now almost impossible to carry out by hand. When information from the employer and employee forms is digitized, though, they can be easily compared and discrepancies flagged automatically.

Scanning in W-2s, however, has been problematic because there is no uniform size or layout for the form. So the commission came up with a way to identify seven crucial fields on the W-2s. No matter what the shape, the W-2 can be scanned and the vital information extracted.