Virginia Department of Taxation eforms System Category: Government to Business Initiation date: February 1, 2012 Completion date: June 1, 2012 Nomination submitted by: Samuel A. Nixon Jr. Chief Information Officer Commonwealth of Virginia Virginia Information Technologies Agency June 3, 2013
Executive Summary The Virginia Department of Taxation offers online services allowing taxpayers to file tax returns, pay taxes, register businesses, view account history and communicate via secure email or online chat. All services are free; most have 24x7x365 website access. In addition to simplifying the process for taxpayers, filing and paying online significantly reduces agency operational costs. Electronic transactions are automatically processed into the accounting system and are significantly faster, more efficient and less prone to errors. Payments are electronically deposited into the commonwealth s bank, making revenue funds more efficient to manage and more timely. Taxpayers, particularly businesses, had requested a simplified tax filing process. Based upon numerous requests, the Department investigated alternatives such as fillable forms and expansion of the existing ifile Web application. Adding to the taxpayer requests, the Virginia General Assembly passed a mandate requiring electronic filing by business for all sales tax returns and payments beginning July 2012. As a result, the Department launched its latest system, eforms, as a simple electronic filing option. A major goal of the Department is to maximize electronic filing options and improve the filing experience for taxpayers. Another goal is to reduce operational costs for the agency by minimizing manpower and time spent processing paper. Paper returns and checks pass through several hands and must be manually prepared and passed through a data collection system before being transferred to the tax accounting system. This process takes hours and does not include taxpayer preparation time. The median time to complete and submit an eforms document and payment is approximately five minutes for the taxpayer which is a significant time saver. With only 14 tax forms and tax payments implemented so far, Virginia taxpayers are already experiencing the ease of eforms. Due to the project success and positive taxpayer feedback, the Department will implement an agency-wide endeavor with eforms enhancements and expand the eforms initiative to include 47 tax forms. Now it is possible to implement an electronic filing option for just about any tax form in two to three months while other agency initiatives continue. More importantly, it is possible to provide an easy and inexpensive electronic filing option for every tax administered. In addition to the value provided to taxpayers and the Department by offering accessible electronic filing, the Department is currently re-purposing eforms to be used as an internal application to replace an aging data-entry system used for capturing data from paper-filed returns. Once fully implemented, this feature is expected to save the agency approximately $30,000 per year in maintenance and hardware fees and eliminate a development platform, reallocating technical resources for other projects. The eforms project reinforces Governor Bob McDonnell s priorities: streamlined business engagement with government, 24x7x365 Web access, automated business processes, greater productivity through technology and expanded back-office platforms. 2
Business problem and solution The Virginia Department of Taxation offers a variety of online services, which allow taxpayers to interact with the agency via the Internet. These services include filing tax returns, paying taxes, registering businesses, viewing account history, checking the status of refunds and communicating through secure email or secure online chat. All of the Department online services are free and available for 24x7x365 website access. Taxpayers, particularly businesses, had long requested an easy and fast mechanism to prepare and file simple tax returns. Based on these requests, the Department began investigating alternatives such as fillable forms, expansion of the existing ifile web application and other available products. Augmenting the desire to provide a simple electronic filing mechanism, the 2012-2014 Appropriations Act now requires that all sales and use taxes, employer withholding taxes and corporation taxes be filed and paid electronically. After much research and in response to the legislative requirements and numerous taxpayer requests, the Department launched eforms as the latest electronic filing system. There was a recognition that a large opportunity existed to provide an efficient, hassle-free option for taxpayers to submit returns and payments electronically, regardless of computer expertise. The challenge was to develop a system that would meet the requirements, such as securely interfacing with the Department s core accounting application, while also providing a design that is intuitive for the entire gamut of taxpayers. The tool used for eforms is a Web-based electronic data collection system created by a local vendor. eforms only requires a personal computer and Internet access; there is no registration, log-in, or additional hardware needed. The forms are designed to look similar to the paper returns with which taxpayers were already familiar. The eforms system was created with simplicity in mind for both taxpayers and for the Department by designing the interface to be closely aligned to the paper returns. Existing electronic filing formats are utilized and help to simplify the implementation. Taxpayers enter their business information, tax return figures and banking information and returns and payments can be submitted within minutes. Without electronic filing options, the taxpayer manually completes a return, writes a check, stamps and addresses an envelope and mails it. Once received, paper returns go through an extensive manual process in order to be entered into the Department s accounting system. The paper return and check are received in the mailroom, opened, prepped, scanned, manually keyed from the scanned image into a data collection system and then verified for completeness and correct calculations. Paper returns and checks must pass through this data collection system before being transferred to the accounting revenue system and ultimately shredded. This process takes approximately two hours. The median time to complete and submit an eforms return is approximately five minutes per transaction, with some less than 30 seconds. The data is passed directly to the tax accounting system. Since taxpayers enter their information directly, 3
filing accuracy is increased by removing the manual data transfer encountered during paper return processing. The eforms system is built on a combination of widely supported client-side technologies and open-source, low-footprint, server-side technologies. eforms are accessed directly from a taxpayer s browser. All major browsers are supported on any platform. All traffic between the taxpayer s browser and the server-side is over Web services using secure HTTP (HTTPS). The server-side components of the eforms system can be installed on any major Web server regardless of platform and can use any major relational database management system for storage. Central processing unit, memory and storage needs are minimal for both the client and server components. The initial development of eforms is done using a wizard-style approach in an Eclipse environment. Customizations are made using a standard programming language. The Department prioritizes eforms implementation by annual volume, form complexity and revenue generated per form. An agile project management methodology was used. This process allowed the agency to roll-out eforms quickly and reinforced the ability to expand based on changing business taxpayer needs. Through this methodology, the agency quickly adapted to legislative mandates requiring a new business-focused tax form to be implemented within a short timeframe, twice since the beginning of 2012. The cost to implement a new eforms document is approximately $40,000. This includes analysis, design, development, testing and implementation. The system infrastructure, ease of deployment and wizard-style development led to the rapid implementation of the eforms system. To communicate the current sales tax mandate, the upcoming withholding mandate and to promote the eforms solution, the Department utilized several methods: met with industry groups to get feedback posted information on the Virginia Department of Taxation website updated paper forms and instructions with more detailed application directions sent a mailer to taxpayers and preparers identifying the online options created a public-facing video sent a new e-alert system message to business taxpayers and tax preparers developed internal training materials and guides for tax representatives created an online eforms user guide posted frequently asked questions (FAQs) with troubleshooting strategies Due to the success of the project and taxpayer feedback, the Department will implement a total of 47 eforms over the next couple of years. There are currently 14 different tax forms available through eforms, with 33 more planned for implementation. The current eforms include multiple employer withholding, sales and use, corporation income, insurance premiums license and motor vehicle rental forms. Voucher-sized tax returns are attractive because of how quickly these can be filed. New eforms can be created 4
easily with minimal development time. However, any form is supported from simple vouchers to multi-schedule income tax forms. Significance of the project What makes the eforms so innovative is the ease and simplicity of the system that also includes logic, calculations and validations, as well as being flexible enough to handle the entire array of possible form types. This simplicity allows businesses to easily file without assistance. eforms has key features for taxpayers. It saves data entered into the system allowing users to resume work after an idle terminal status. eforms performs calculations resulting in fewer errors requiring review from a tax representative. eforms has the ability to save static data fields for future filings such as business demographics and banking information. In order to reduce errors prior to submission, eforms validates required fields and calculations and restricts invalid characters. Upon completion, eforms saves or prints a portable data file (PDF) copy of the return and payment. eforms allows an option for a password-protected confirmation via email. The completed eforms transaction is instantaneous. The simplicity of eforms is also evident for agency staff through reduced workforce requirements, where only one business analyst is needed for: preparation, documentation and testing for new eforms development and value-added enhancements customer and technical support for eforms inquiries transaction monitoring data mining for departmental documentation and reporting purposes eforms includes an automated dashboard that recognizes and eliminates accidental duplicate submissions. In this way, the Department proactively responds to returns containing errors, rather than once they posted to the accounting system. NASCIO and state CIO priorities align with the eforms commitment through consolidation, optimization, legacy modernization, and budget and cost control areas. Governor Bob McDonnell s priorities for Virginia businesses are apparent through the eforms system. This includes streamlining business engagement with government, 24x7x365 website access, automated business processes, greater productivity through technology and expanded back-office platforms. 5
Project benefits The eforms system enhances the filing experience for taxpayers and reduces operational costs for the agency. The eforms tool accomplished several objectives: simplified tax filing for businesses increased return accuracy and expedited filing time for taxpayers reduced agency costs through elimination of manual processing ensured long-term cost savings for the commonwealth reduced margin of error through electronic versus paper transactions saved business taxpayer demographic information for future filings With the launch of eforms on June 1, 2012 along with the July 1, 2012 sales tax electronic filing mandate, it was expected that a significant number of small businesses would utilize eforms. Electronic filings increased from 50 percent to 85 percent in the month following the legislative mandate (Figure 1). Figure 1: Electronic filing program results for Retail Sales and Use Tax Since the initial launch, eforms has received approximately 235,000 returns and processed approximately $362 million in transactions. In FY2012, 7 million tax returns were received through all of the online services (from business and individuals). The potential exists for another 4.5 million returns to transition from paper filing to electronic filing. 6
From the Department s perspective, the value includes cost savings of manpower no longer needed to process paper returns. The average cost to process a voucher-sized paper return is approximately $0.10. eforms costs less than $0.01 per return. With approximately 250,000 eforms received, that is a savings of $22,500 the first year. This is expected to increase to $40,000 a year when the employer mandate goes into effect July 2013. Taxpayers also receive a time and expense savings. Intangible benefits include positive taxpayer experiences, faster depositing of revenues, reduced taxpayer and Department errors and elimination of a development platform. In addition, eforms is being re-purposed to be used as an internal application to replace an aging data-entry system used for capturing data from paper filed-returns. Once fully implemented, this additional benefit will save the agency approximately $30,000 per year in maintenance and hardware fees as well as eliminating a development platform freeing up technical resources to work on other projects. There are currently 14 different tax forms available through eforms with 33 more planned for implementation. Any type of form is supported, from simple vouchers to multi-schedule income tax forms. The technology used to create eforms leaves a very small footprint on the agency s servers and eforms can be hosted on any technology platform. The feedback from users has been extremely positive and the Department has already implemented several value-added enhancements due to taxpayer feedback. Taxpayer comments include: Honestly, this is great! Good job Virginia Dept. of Taxation!!! I am really impressed with the online form and appreciate the option to do all of this online. No wasted paper form and instruction, no wasted postage for VA or for me to mail them back. Nice job on this process. I love the simplicity of the on-line form and the convenience of using it anytime, day or night. It fits my schedule perfectly. I'm intimidated by computers and always afraid of making a mistake on filing. This made it a breeze. This is a process that is user and business friendly. Those who created this method for filing VA Forms ST-9 deserve a pat on the back. Thank you. Very nice option for filing without having to log-in fully on account for all corporate taxes. 7