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The Future of TaxThe Future of TaxCollections:Collections:

E-filingE-filing’’s Who, When ands Who, When andHow MuchHow MuchAmy Amy RehderRehder Harris and Jay Munson Harris and Jay Munson

Tax Research and Program Analysis SectionTax Research and Program Analysis SectionIowa Department of RevenueIowa Department of Revenue

Prepared for the Federation of Tax AdministratorsPrepared for the Federation of Tax AdministratorsRevenue Estimation & Tax Research ConferenceRevenue Estimation & Tax Research Conference

September 16-20, 2006September 16-20, 2006

OutlineOutline

IntroductionIntroductionHistory of E-Filing in IowaHistory of E-Filing in IowaWho?Who?How Much?How Much?When?When?E-Filing, Revenue Forecasting &E-Filing, Revenue Forecasting &Fiscal AnalysisFiscal AnalysisConclusionConclusion

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IntroductionIntroduction

Iowa e-filing share exceeded 65% in 2005Iowa e-filing share exceeded 65% in 2005E-filing reduces processing costs for StateE-filing reduces processing costs for StateE-filing speeds refund receipt forE-filing speeds refund receipt fortaxpayerstaxpayersE-filing provides data quickly for revenueE-filing provides data quickly for revenueforecasting and fiscal analysisforecasting and fiscal analysis Caution: Is the data representative?Caution: Is the data representative?

History of E-Filing in IowaHistory of E-Filing in Iowa

E-filing first available for tax year 1994E-filing first available for tax year 1994Iowa participates in federal e-file programIowa participates in federal e-file program Free-File AllianceFree-File Alliance Software: $10 to $30 federal and stateSoftware: $10 to $30 federal and state99% of Iowa tax forms are available99% of Iowa tax forms are availableelectronicallyelectronicallyGoal: 70% e-filing voluntarily in tax yearGoal: 70% e-filing voluntarily in tax year20062006

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Rising Share E-Filing in IowaRising Share E-Filing in Iowa

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

IDR E-Filing Cost SavingsIDR E-Filing Cost Savings

Printing and mailing paper formsPrinting and mailing paper forms 84 percent reduction in orders in 84 percent reduction in orders in ’’06 06 vsvs ’’9696Fewer phone calls from taxpayersFewer phone calls from taxpayers 52 percent reduction in calls requesting filing52 percent reduction in calls requesting filing

help in help in ’’06 06 vsvs ’’9797Lower processing labor costsLower processing labor costs 46 fte/$1 million to 12 fte/$260,000, 46 fte/$1 million to 12 fte/$260,000, ’’95 95 vsvs ’’0606Reduced storage needsReduced storage needs

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Who? E-Filing Shares by AgeWho? E-Filing Shares by Age

E-shareE-shareReturn%Return%E-shareE-shareReturn%Return%

52.552.57.77.726.826.87.47.475+75+59.259.27.97.933.533.57.87.865-7465-7462.862.813.113.140.240.211.411.455-6455-6468.068.017.617.646.446.417.417.445-5445-5474.474.416.016.054.754.717.817.835-4435-4476.276.215.615.659.959.915.315.325-3425-3465.865.813.613.648.848.817.817.8<24<24

2005200520012001

Who? By State Filing StatusWho? By State Filing Status

E-shareE-shareReturn%Return%E-shareE-shareReturn%Return%

72.372.30.10.149.149.10.10.1WidowWidow80.380.39.19.165.565.58.58.5HeadHead50.250.21.21.232.432.41.21.2SeparateSeparate

69.669.633.433.447.947.933.733.7Sep/SameSep/SameReturnReturn

60.260.213.613.636.536.513.713.7JointJoint62.162.142.642.643.443.442.942.9SingleSingle

2005200520012001

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Who? By Resident StatusWho? By Resident Status

E-shareE-shareReturn%Return%E-shareE-shareReturn%Return%

67.267.250.750.749.149.151.651.6RuralRural63.763.740.040.048.448.440.140.1UrbanUrban

Iowa Residents: Those Reporting CountyIowa Residents: Those Reporting County

65.765.790.790.748.748.792.092.0IowansIowans

28.228.29.39.311.311.38.08.0Non-Non-ResidentsResidents

2004200420012001

Who? By AGIWho? By AGI

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

<=$0

$0-$10,000

$10-20,000

$20-30,000

$30-40,000

$40-50,000

$50-60,000

$60-70,000

$70-80,000

$80-90,000

$90-100,000

$100-125,000

$125-150,000

$150-175,000

$175-200,000

$200-250,000

$250,000+

Sh

are

E-F

ilin

g

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20012003

2002

2004

2005

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Who? By Wage ShareWho? By Wage Share

E-shareE-shareReturn%Return%E-shareE-shareReturn%Return%

71.471.46.06.054.154.15.45.4Over 100%Over 100%67.567.562.162.153.953.960.860.875-100%75-100%60.360.36.26.239.539.56.16.150-75%50-75%56.256.24.14.134.234.24.14.125-50%25-50%45.945.921.521.526.426.423.623.6<25%<25%

2004200420012001

How Much? By Liability at FilingHow Much? By Liability at Filing

E-shareE-shareReturn%Return%E-shareE-shareReturn%Return%

57.957.925.225.228.528.516.416.4OweOwe36.036.09.99.927.127.16.26.2ZeroZero73.573.564.864.850.950.977.477.4RefundRefund

2005200520012001

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How Much? By Total Tax LiabilityHow Much? By Total Tax Liability

0%

10%

20%

30%

40%

50%

60%

70%

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100%

Zero

0 to

$50

$50

to $

150

$150

to

$250

$250

to

$400

$400

to

$600

$600

to

$800

$800

to

$100

0

$100

0 to

$12

00

$120

0 to

$14

00

$140

0 to

$16

00

$160

0 to

$18

00

$180

0 to

$20

00

$200

0 to

$25

00

$250

0 to

$30

00

$300

0 to

$40

00

$400

0 to

$80

00

Ove

r $8

000

Sh

are

E-F

ilin

g

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001

2003

2002

20042005

When? By Filing DateWhen? By Filing Date

E-shareE-shareReturn%Return%E-shareE-shareReturn%Return%

9.89.89.59.57.67.65.95.9May-JulyMay-July58.158.125.225.234.034.027.127.1AprilApril65.565.526.926.949.349.325.225.2MarchMarch83.783.731.731.770.870.829.129.1FebruaryFebruary95.095.06.76.794.494.412.712.7JanuaryJanuary

2005200520022002

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E-Filing, Revenue Forecasting &E-Filing, Revenue Forecasting &Fiscal AnalysisFiscal Analysis

Revenue forecasting: hope to use income dataRevenue forecasting: hope to use income datafrom early e-filers to confirm forecastsfrom early e-filers to confirm forecasts Early e-filers heavily wage earnersEarly e-filers heavily wage earners Large shifts in numbers in early monthsLarge shifts in numbers in early months Recent stabilization in e-filing may reveal future infoRecent stabilization in e-filing may reveal future info

Fiscal analysis: hope to use e-filing data asFiscal analysis: hope to use e-filing data astimely base data for tax micro modeltimely base data for tax micro model Not representative in the AGI/Tax liability tailsNot representative in the AGI/Tax liability tails Weighting technique or Weighting technique or quantilequantile regression to make regression to make

data useful for such analysisdata useful for such analysis

ConclusionsConclusionsE-filing saves IDR resourcesE-filing saves IDR resourcesE-filing sped up refund receipt for 48% taxpayersE-filing sped up refund receipt for 48% taxpayersWho, How Much and When?Who, How Much and When? YoungYoung Head of household/marriedHead of household/married Rural Iowa residentsRural Iowa residents Middle-incomeMiddle-income Wage-earnersWage-earners Refund recipients/Average tax liabilitiesRefund recipients/Average tax liabilities Early filersEarly filers

Potential for new detailed analyses with rich dataPotential for new detailed analyses with rich data