CASE 8-2 The State Department of Taxation
The department of taxation in your state is developing a new computer system for processing individual and corporate income-tax returns. The new system features direct data input and inquiry capabilities. Identification of taxpayers is provided by using the Social Security number for individuals and federal tax identification number for corporations. The new system should be fully implemented in time for the next tax season.
The new system will serve three primary purposes :
1. Data will be input directly into the system from tax returns using computer terminals located at central headquarters.
2. The returns will be processed using the main computer facilities at central headquarters. Processing will include four steps:
a. Verifying mathematical accuracy
b. Auditing the reasonableness of deductions, taxdue, and so on, through the use of edit routines, which also include a comparison of current and prior years’ data
c. Identifying returns that should be considered for audit by department revenue agents.
d. Issuing refund checks to taxpayers
3. Inquiry service will be provided to taxpayers upon request through the assistance of tax department personal at five regional offices. A total of 50 terminals will be placed at each regional office. A taxpayer will be allowed to determine the status of his or her return or get information from the last 3 years’ returns by calling or visiting one of the department’s regional offices.