The Effects of Lowering State E- File Mandate Thresholds

Transcription

1 The Effects of Lowering State E- File Mandate Thresholds Amy Pitter, Commissioner, Massachusetts Dept. of Revenue Michael Bryan, Director, New Jersey Division of Taxation

2 MA EFile Mandates Commissioner Amy A. Pitter MA Department of Revenue

3 MA Tax Base at a Glance Population 6.6M Personal Income Taxpayers 4.8M Number of PIT Returns Filed/Year 3.46M Business Taxpayers 200K Sales Taxpayers 120K Employers K Corporations 150K

4 Benefits of EFile Speed and accuracy of data capture; fewer exceptions Simplified compliance; faster refunds Reduced staffing, processing and printing costs Essential offset to staff losses, hiring freezes Faster, more accurate revenue estimates More timely/accurate responses to legislative requests

5 History of MA EFile Mandates 2002 Granted legislative authority to require efiling 2003 Issued administrative mandate: E-registration/file/pay for new businesses and existing ones with combined liabilities of $100K + Efile by 3rd Party Bulk filers Penalty of $100/each paper return or paper check Introduced free WebFile for Business (WFB) app 2004 Lowered business tax efile threshold to $10K + 2D bar codes on software produced Income returns Efile by income preparers filing returns Epayment of Income extension payments of $5K +

6 History of MA EFile Mandates 2005 Corporations with $100K + in income, and certain partnerships, must efile/epay using commercial software or epay thru WFB; EPay Corporate Extensions of $5K + Lowered Income preparers efile threshold to 100 returns 2007 Health Care Reform Individual Mandate Electronic submission of Forms 1099-HC by employers and health insurers 2009 Efile with no paper option for Corporate Combined Groups and Pass-Through Entity Withholding Lowered efile mandate for W-2/1099 Forms from 250 employees to Lowered business tax threshold to $5K +

7 MA Benefit from IRS Mandate 2011 Had 96% compliance with Practitioner efile mandate but received 155K more returns efiled by preparers, thanks to IRS mandate of 100 or more returns 2012 Lowered Income tax preparers efiling threshold to 10 returns, in line with IRS mandate

8 EFile Statistics Income Tax *TIR Amendment to M.G.L. c.62c, 5 authorizes the Commissioner of Revenue to specify the method of filing tax returns and other documents. ** TIR Further expands electronic filing requirements for certain filers. All paper forms and schedules (resident end non-resident) must contain 2D barcoding and fixed position text. All MA tax preparation software must be approved by the Department. *** TIR Income tax return preparers who complete 200 or more returns (including efiled) are required to use electronic means to file all PIT returns and must, without possibility of override, set 2D barcodes to print on forms specified by the Department. **** TIR Income tax return preparers who complete 100 or more returns (including efiled) are required to use electronic means to file all PIT returns.

9 Efile Savings Descrip(on FY01 FY11 % Variance FY01 vs FY11 $ Variance FY01 vs FY11 Processing Staff (Full- (me and Seasonal) $ 6,385,936 $ 3,520, % $ (2,864,956) Prin(ng Costs $ 2,632,050 $ 525, % $ (2,106,888) Lockbox Costs $ 2,813,598 $ 921, % $ (1,892,202) Grand Total $ 11,831,584 $ 4,967, % $ (6,864,045)

10 EFile Helps Offset Staff Losses $X B TAX ADMIN FTE COUNTS OVER 15 YEARS FY96 VS FY11 (w/local Services) FY96 FTEs FY01 FTEs FY11 FTEs 15 Yr Change % Decrease %

11 Resistance to Efile Mandates Taxpayers have told us they don t like : Being told how to conduct my business Submitting personal info via internet Cost of purchasing computers/software packages Government mandates in general; ACH Debit in particular! Efile penalties Lack of broadband in Western MA

12 Overcoming Resistance to EFile Provide TeleFile alternatives for the computer averse Develop free options WebFile for Income and WebFile for Business Offer Mapped Data Upload option Provide access to online filing options thru local office kiosks

13 Unintended Consequences For Taxpayers: System Navigation was a challenge Overwhelmed with calls at rollout Still, a decade later: Lockouts due to User Name and Password errors Distrust of e-transmission of personal data Develop automated password reset tools Provide online video tutorials for taxpayers

14 Unintended Consequences

15 Unintended Consequences For DOR Staff: Staff resistance to shift from being tax experts to answering technical questions about browsers, etc. Provide online guidance to address most common technical questions Manage change in roles as taxpayers turn to online tools and software for tax compliance

16 Efile Supporters 2003 Letter from WFB User: Just completed my first return using WebFile. It was the simplest quarter in ten years. My returns were prepared and paid in less than ten minutes. On behalf of small businesses operating in MA, thank you for developing this streamlined method for processing what was a tedious task Blog Post when users had to convert from WFB to new site to report Unemployment Insurance: I ve made my UI deposits through the DOR website every quarter for five years now. It was as simple and painless as remitting taxes can ever be...i don t suppose there s a ghost of a chance that they ll simply revert to the DOR form that has worked fine for all these years?

17 MA Mandates Lessons Learned

18 Provide Early Warning Inform legislators before administrative mandate rollouts Advertise efile changes in state and industry group mailings to taxpayers Utilize Web alerts to keep users informed Announce all phases of rollout in advance Once In, Always In Be reasonable with Penalty imposition

19 Involve Stakeholders Outreach to practitioners and industry group representatives Design online systems to accommodate both taxpayer and practitioner needs Meet regularly with Payroll Service Providers Conference calls with third party software vendors income tax and 1099-HC reporting Outreach to MA cities and towns

20 Impact of New Jersey E-File Mandates Michael J. Bryan Director, NJ Division of Taxation

21 NJ Individual Income Tax Practitioner E-File Mandate

22 NJ Individual Income Tax Practitioner E-File Mandate 2004 Threshold = 200 or More Prac11oner- Prepared Returns in Prior Tax Year 2006 Threshold = 100 or More Prac11oner- Prepared Returns in Prior Tax Year 2007 Threshold = 50 or More Prac11oner- Prepared Returns in Prior Tax Year

23 NJ Individual Income Tax Practitioner E-File Mandate 2008 Threshold = 25 or More Prac11oner- Prepared Returns in Prior Tax Year 2011 & Later Threshold = 11 or More Expected Prac11oner- Prepared Returns in Current Tax Year Threshold Includes Returns Prepared for Estates & Trusts

24 NJ Individual Income Tax Return Filing Statistics Percentage of Returns Filed Electronically Tax Year Electronically Filed Paper Filed Total Filed % Electronic ,172,535 3,053,226 4,225,761 28% ,729,555 2,490,556 4,220,111 41% ,083,632 2,378,616 4,462,248 47% ,353,640 2,312,571 4,666,211 50% ,597,359 2,144,121 4,741,480 55% ,817,364 1,923,077 4,740,441 59% ,858,934 1,704,770 4,563,704 63% ,237,290 1,540,736 4,778,026 68%

25 NJ Individual Income Tax Return Filing Statistics 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 Paper Electronic 1,000, ,

26 NJ Sales & Use Tax E-File Mandate

27 NJ Sales & Use Tax E- File Mandate

28 NJ Sales and Use Tax Return Filing Statistics Percentage of Returns Filed Electronically Tax Year Electronically Filed Paper Filed Total Filed % Electronic ,413 8, , % ,396 5, , % ,136 3, , % ,199 1, , %

29 NJ Employer Withholding Tax E-File Mandate

30 NJ Employer Withholding Tax 2009, 1 st Quarter E-File Mandate Mailing of online PIN and filing instruc1ons replaces preprinted paper returns In 2000, Electronic Filing through the NJ Taxa1on Web site and Filing by Telephone Became Available Telephone Filing Ended December 2008 Filing also PermiVed in Bulk using Secure File Transfer Protocol (SFTP)

31 NJ Employer Withholding Tax Return Filing Statistics Percentage of Returns Filed Electronically Tax Year Electronically Filed Paper Filed Total Filed % Electronic , ,560 1,092, % ,030,091 12,347 1,042, % ,013,752 8,020 1,021, % ,656 5,575 1,003, %

32 NJ Partnership Returns E-File Mandate

33 NJ Partnership Returns E-File Mandate Filing of Returns with 50 or Less Partners through the NJ Taxa1on Web site

34 NJ Partnership Returns Return Filing Statistics Percentage of Returns Filed Electronically Tax Year Electronically Filed Paper Filed Total Filed % Electronic ,743 76, ,681 55% 2011* 88,940 15, ,701 85% * Par1al results

35 NJ E-Filing Mandate Conclusions Prac11oner E- File Mandate for Individual Income Tax Returns Shows Posi1ve Effect on E- File Rates. E- File Mandate for Sales and Use Tax vendors successful with Division Customer Service Assistance E- File Mandate for Employer Withholding Tax Returns Results in 99% Adop1on Within First Year Prac11oner E- File Mandate for Partnership Returns Shows Higher Adop1on Rate than Individual Income Tax Returns.

36 Impact of New Jersey E-File Mandates Michael J. Bryan Director, NJ Division of Taxation