FTB/CSEA Liaison Meeting

September 17, 2004

e-Programse-ProgramsUpdateUpdate

Franchise Tax BoardFranchise Tax Board

• Mandatory e-fileMandatory e-file- UpdateUpdate

• Pro Forma Filing PilotPro Forma Filing Pilot- All the detailsAll the details

Overview

e-file Program - Growth

05

10e-File Returns (in Millions)

1997

1999

2001

2003

e-File/ Practitioners

e-File/ Taxpayers

TeleFile

Mandatory e-file Update

• Effective January 1, 2004

• Mandates practitioners who prepared more than 100 returns, at least one of which was prepared using computer software, to e-file

New Tax Practitioner Increase

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

00 - 01 01 - 02 02 - 03 03 - 04

23,88216,11212,689 38,682 Number of Accepted Practitioners

Rank: based on

percentage of electronic

returns

State

Years

Mandate in Effect

Percent of Returns that

are Electronic

Number of Returns per Tax Pro to be Under Mandate

1 MN 4 59% 100

2 CA 1 51% 100

3 MI 1 51% 200

4 WI 2 49% 200

5 OK 1 42% 50

Mandatory e-file Nationwide

Recent FTB survey shows:

• Majority of tax practitioners are satisfied or very satisfied with e-file

• 67% agree that e-file is easy

• Majority indicate that clients benefit from

e-file

• Many indicate handling rejects can be difficult

• Some indicate that e-file should not be mandated

Approach to Enforcement:

• Focus on willfully noncomplying practitioners

• Sending reminder letters to noncomplying practitioners in late October

• Visiting noncomplying practitioners• Publishing articles regarding the mandate

•

Dedicated Web page for mandatory e-file

–

FAQs (updated regularly)

–

Legislative actions

–

Copies of notices in Spanish

–

Letter from FTB to give to your clients

Mandatory e-file Resources

Pro Forma Filing Pilot

What Is Pro Forma Filing?

• Pro Forma return filing is a tax concept designed to reduce taxpayer burden for taxpayers filing the simplest California returns.

• Current concept applies to:– Wage earners only– Single– No dependents

• Reduce taxpayer burden

• Provide taxpayers online, secure and private access to their tax data

Benefits of Pro Forma

• Reach taxpayers who qualify for refunds who are not otherwise claiming them

• Reach certain non-filers and get them into the routine filing process

Benefits of Pro Forma

• Successful variations of pro forma filing in several countries including:–Germany–Japan–Denmark–Sweden

Other Pro Forma Experiences

• The IRS has studied pro forma filing and found:

–Surveys indicate taxpayer support, however

– IRS information systems cannot provide the data needed on a timely basis

Other Pro Forma Experiences

• FTB routinely receives and processes EDD wage information, which makes us perfectly suited for a pro forma filing program

EDD Information

How Will Pro Forma Work?

• FTB will select a group of taxpayers to participate in the program, who must be:

–Single–Have no dependents, and–Have one employer

FTB Will:

• Provide selected taxpayers with an invitation to participate

• Two versions of the invitation:

1. Letter and completed return

2. Letter only

The Taxpayer:

• May choose to:

- accept the return, as presented

- make minor modifications

- come to FTB’s Website to file or modify the return and file it

- ignore FTB’s invitation

The Taxpayer:

• Will enter SSN* and signature (on the the paper return or online)

–Indicating that all their tax data is true and correct under penalty of perjury

*In compliance with SB 25, SSN will not be preprinted on the letter or return.

SB 25 mandates that state agencies will not publicly post or display an individual’s SSN or compromise the security of an individual’s SSN.

• Ability to deploy and test pro forma filing concept by February 2005

• Test taxpayer response to our new program

• Make recommendation to our Board after studying pilot results

Why a Pro Forma Pilot?

• Provide more taxpayers and their authorized representatives with online, secure access to wage and withholding data

Future Benefits

• FTB would like about 10,000 participants, resulting in a statistically valid study

• To achieve this, FTB may invite up to 50,000 taxpayers to participate who qualify to file a simple return

Pro Forma Volumes

• The cost to deploy the Pilot is about $200,000

• No requests for new funding

• Leverage existing FTB systems to accommodate pro forma filing

Cost

Thank you!

Cathy CleekChief, Filing Division

916.845.6396

cathy.cleek@ftb.ca.gov