Montana fixes a taxing problem

The Montana Department of Revenue recently rolled out a new electronic tax processing system that allows the state to more easily identify tax evaders and collect more revenue. Dubbed the Integrated Revenue Information System (IRIS), the system costs just over $27 million and serves a need left unfulfilled by a failed deployment.

In the late 1990s, the Montana Department of Revenue tried to build a system from the ground up. POINTS (Process Oriented INTegrated System) was intended to provide one cohesive system for tax computing and tracking but turned out to be a “very big failure for the state,” says Margaret Kauska, an administrator in information technology and processing at the Montana Department of Revenue.

According to Kauska, the causes of that failure were the complexity of the Montana tax system, a problematic relationship with the vendor, and departmental reorganization.

The state legislature demanded that a new system be put in place, and so IRIS was launched in 2003. IRIS is expected to be completed this summer.

“The new system allows the agency to administer multiple tax types on a single integrated system. We can view all tax types for each taxpayer in a single location and calculate tax bills more accurately than we could before. We’re now able to provide much better customer service to taxpayers and to more easily identify unpaid taxes,” Kauska says.

Gradual Improvement

Last year, the Department of Revenue implemented the individual income tax module for the first time in the new system, which brought some growing pains. But after the 2006 tax season, when they had finally caught up, Kauska and her team went back and looked at the pain points and lessons learned.

“We are more efficient this year than we were last. We continue to improve and will get better as we go,” says Kauska.

IRIS ensures that the tax data used by the state’s revenue estimating and tax policy staff is more reliable. The system also supports the agency’s compliance efforts and makes its business processes more efficient.

The system has approximately 300 users in the Department of Revenue and processes more than a million tax-related documents each year, including tax returns and other documents such as change-of-address forms.

Collection and Compliance

The return on investment from IRIS is clear, says Kauska. “With our prior system, the cost of lost opportunities was high because system maintenance and repair took priority over compliance activities. With the implementation of IRIS, we’ve been able to focus on compliance and collect more revenue than we had previously,” she says.

IRIS has a Web-based component that allows citizens to file a limited number of tax forms. The individual income tax short form was made available in mid-January for the 2007 tax season.

“We’ve asked for funding to expand our Web-based forms to include all tax types, as it currently only supports one. That funding request is being considered by the state legislature right now,” says Kauska.

Kauska hopes that if the budget request is approved, all citizens who are able to access a Web browser will be able to use the system to file taxes.

“A Web-based software forms the basis of our free electronic filing initiative. We want the requested funding so we can provide this service to the citizens of Montana, enabling them to file their taxes free. Increased electronic filing means less paper, which works out well for us, so it’s a win-win situation,” adds Kauska.

The initiative envisions taxpayers using electronic means to log in and file their tax returns, figure which returns they should file, and file back taxes. Businesses will also use it to file their business or corporation tax returns, update their profile information, and register for taxes online.

Kauska and her team plan to finish IRIS at the end of this fiscal year and then implement a Web-based component contingent on approved funding.