1. Integrate government financial filings, reporting, and payments processing. The Secretary of the Treasury should implement integrated financial filings, reporting, and payments processing by January 1997. This integration should address such areas as individual tax filing and account settlement; business reporting, including wage and withholding information; data from financial institutions; and other employer and employee financial data required by federal, state, and local government agencies. The integrated filing, reporting, and payment processing program should be piloted by the IRS to prove the concepts and quantify the benefits--not only to citizens in terms of enhanced governmental services, but to the governmental process at large. A network such as the Treasury 's Consolidated Data Network and its successor, the Treasury Communications System, could provide an evolutionary migration path to full implementation minimizing the incremental costs. To fully implement joint electronic filing of federal, state, and local tax returns, all states and localities that levy income taxes should agree on an uniform wage code that would enable the use of electronic data interchange. Separate federal and state tax filings defeat the purpose of trying to eliminate duplication and make government more efficient. State and local information would similarly flow to a federal access point for data interchange of financial and employment information when required by any federal agency. In order to make electronic filing more efficient, a digital signature standard that can stand on its technical merits in a judicial court challenge must be adopted.3 Presently, when citizens file returns electronically, they are typically required to sign and mail a paper certificate to the IRS to be matched with the electronic return. To protect the privacy and confidentiality of individuals and corporations, a method of electronic verification, coupled with a privacy system that has the public's trust, must be employed. Without these safeguards, public fears concerning disclosure of information and governmental concern for data integrity would remain a problem.4 One possible scenario might be that a citizen uses an electronic government services kiosk or home personal computer to file tax return information with the IRS, including appropriate data the state and local governments may require. The data would be transmitted to an IRS service center to be processed, verified for accuracy, and then forwarded to the state, thus meeting the filing requirements of both entities in one step. This approach could be expanded to include the joint auditing of financial data and the joint collection of taxes--the genesis of a virtual tax financial data agency for business and individuals. Both small and large business alike could benefit from the reduction in the number of reports that have to be submitted to numerous federal agencies and state and local governments. Simplified filing of business financial and employment data could benefit small business operators as desktop computers with communications capabilities are now in widespread use. Until the infrastructure is in place, state and local governments (or the Postal Service) could provide access service for small business reporting and taxpayer financial information filing. Endnotes 3. For further information see IT10: Develop Systems and Mechanisms to Ensure Privacy and Security. 4. Ibid.
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