When Maine Revenue Services was faced with implementing a more effective means of revenue collection while increasing taxpayer convenience, the solution was simple: accept cards for payment.

The agency's workload is substantial. It currently administers most of the taxes within the state of Maine, including sales and use taxes, corporate income taxes, employee withholding taxes and individual income taxes. The two largest volumes of work are in the individual income and sales tax sectors, which collect, file and process more than 950,000 returns per year.

"The work is constant and the volume is heavy."
-Errol Dearborn, Director of Systems and Programming Division

The agency performs a number of ancillary services designed to increase the effectiveness of processing. "We develop forms to simplify the process, we answer taxpayer questions, and we set up scheduled payments if the full tax amount cannot be paid on the due date," says Errol Dearborn, Director of Systems and Programming for Maine Revenue Services.

The Process Resulting Benefits The Future Conclusion

The Process

The number-one thing the agency was looking to do was to improve service to taxpayers. "Until last year, we only accepted cash, check and EFT payments for current obligations," says Dearborn. He adds that as they began to see the computer age move into the electronic age, they knew the agency would need to implement more accommodating payment methods. They adopted the card acceptance program in conjunction with a full-scale telephone filing system. "We want the taxpayers to be able to complete their filing and payment in one electronic transaction."

"The added benefit was that we were realizing payment immediately by accepting cards, rather than waiting for a check, which may never come."
-Errol Dearborn, Director of Systems and Programming Division

Individual income taxpayers could now pay current obligations with their payment card using the telephone filing system in one seamless transaction. Again, because the agency wanted to offer better taxpayer service, filing via the telephone for their largest tax sector provided the agency with a simpler means of filing, as well as reducing the amount of paperwork incurred by the staff.

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For Maine Revenue Services, accepting credit card payments resulted in the following benefits:

• Faster processing and quicker refunds
• Helps to facilitate the filing of paper returns
• Reduces handling costs and fees due to lost and returned checks
• Greatly reduces the amount of paperwork incurred by the staff
• Reduces error correction
• Decreases collection account work
• Happier taxpayers

The agency usually receives 1.5 million checks per year. 1,600 of those checks are returned for nonpayment or insufficient funds - fees that the agency must bill back to the taxpayers. Credit and debit card acceptance reduces those handling costs and fees due to lost and returned checks, which increases the agency's bottom line.

Returned check fees are incurred by the agency and passed on to the taxpayer. Checks that never arrive create revenue problems. When either happens, the taxpayer becomes delinquent and the collections staff begins their work. Payment of the original return by payment card decreased the collection accounts because the agency did not have these traditional check problems. A telephone filing system encourages electronic filing, and providing card payment options in conjunction with telephone filing seems to be an ideal addition.

Dearborn also notes that card payment processing frees up more resources to process paper returns. The agency's biggest savings is in processing returns electronically, and accepting credit and debit card payments increases this savings.

The processing of paper returns takes a great deal of staff time because of the high volume of error corrections and taxpayer contact for additional information. With the telephone filing system, all required information is received from the taxpayer in the correct format or the return is kicked back to the filer for correction of any errors; so the agency saves significant processing time.

"We compare the electronic return against the paper. Credit card payment acceptance facilitates electronic filing."
-Errol Dearborn, Director of Systems and Programming Division

Dearborn believes this service improvement results in faster return processing, which means checks are deposited faster and refunds are issued to the taxpayer more quickly. He is speeding up the entire system while continuing to improve the agency's service to the taxpayer.

Dearborn adds that the agency is looking for electronic payment to expand over the next few years through such methods as the Internet, and is planning accordingly.

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The Future

"We plan to expand our telephone filing system to more tax sectors and include more payment methods," explains Dearborn. This includes past due balance payments, arranged payment schedules, or paying a current return. Ideally the taxpayer would select from a menu of options ranging from the tax category to the application of the payment, and be able to use their credit and debit cards to make payment.

Dearborn adds that this expanded filing and payment system will make processing easier and paperwork less tedious.

The agency went online in October of 1998, with an Internet filing program incorporating an electronic debit payment method: the taxpayer logs on to a form, fills in the appropriate bank account number and the amount of the payment. The payment is then electronically processed through a clearinghouse where the amount is debited from the taxpayer's account to the agency's. This system does not yet include card payments, but Dearborn hopes to add card acceptance in the future. Currently the taxpayer can print out a payment voucher to send in with their check payment.

"Accepting card payment [over the Internet] will give us the flexibility to move more smoothly into electronic commerce."
-Errol Dearborn, Director of Systems and Programming Division

Currently available online is the filing of sales and combined quarterly returns for withholding taxes and unemployment contributions for businesses.

"The Internet is a very new arena for us, and we've only completed three filing cycles so far. Yet we've already received three times as many returns as we did last quarter at this time."

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Conclusion

Dearborn adds that they have many positive responses and customers want to know when other business tax filing options will be added to the Internet.

"In planning for the future, card acceptance gives us more options, and as we grow more comfortable with its use, we will be more comfortable employing it. Card acceptance builds on itself," says Dearborn.

The agency is constantly striving to provide taxpayers with as many viable payment options as possible, and Dearborn notes that electronic payment and card acceptance are both means to that end.

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