Tax time gets a high-tech twist

By Jessica Davis, InfoWorld |  Software

IN THE PAST FIVE years, people have purchased everything from groceries to books to automobiles online as businesses rolled out ERP (enterprise resource planning) systems to increase efficiency. Now companies in the supply chain are working to share information and create marketplaces.

"Photo by Walter P. Calahan"But one sector that touches all these enterprises has lagged behind, still relying on paper for most of its business: tax. The Internal Revenue Service and tax organizations in private industry have suffered as an overlooked stepchild, even as companies moved to modernize other operations.

"The tax discipline is a lot of times looked at as a blocker or a problem," says Steven Rainey, partner in Washington-based KPMG's eTax solution practice. "A lot of times tax departments bring up issues rather than solutions. Nontax people don't understand that tax is not a fixed number."

The current efforts may have a way to go, but business tax preparation and planning is slowly getting easier. The government is making moves to bring taxes up to speed with the rest of business technology and perhaps take a bit of the pain out of the tax process. Separately, businesses that specialize in tax consulting, providing tax information or forms, or preparing tax returns are moving their processes into the electronic age.

Digging out of the paper avalanche

The IRS today relies on Unisys, Cobol, modems, a lot of flat files, and a weekly batch update to run the huge government agency.

"It's not conducive to the way everyone does business now," explains Sherrill Fields, national director of the IRS' diversified electronic filing division, in Washington. "As people get used to 24-hour service in their private lives, they don't understand why the government can't do the same."

So change is underway. A few years ago, after receiving appropriations from Congress to address the problem, the IRS awarded a multibillion-dollar contract to El Segundo, Calif.-based Computer Sciences Corporation, charging that company with the modernization of IRS systems in the Business Systems Modernization Program.

Since the IRS modernization project has a time frame of 15 years, the IRS is taking steps to make legacy systems better in the interim. For example, in the last few years the IRS created a process for individuals to file their taxes electronically; business returns, however, were a "second priority" that is now being addressed, Fields says.

Among the electronic tax options available to companies today is the EFTPS (Electronic Federal Tax Payment System), which enables business to make all their tax payments electronically. A pilot program, which the IRS expects to go live this fall, will also allow businesses to make payments and view their IRS payment history online.

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