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State of New Jersey Experiences in Tax Processing Making Technology Work Statewide Steve Csogi August 17, 1999 State of New Jersey Division of Revenue

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08/12/99 -Page 2 State of New Jersey Document Processing System State of New Jersey Division of Revenue Outline F Background F DPS Project Scope F System Architecture F Forms F Inscript Processing F Results F Next Steps

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BackgroundBackground State of New Jersey Division of Revenue

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08/12/99 -Page 4 State of New Jersey Document Processing System State of New Jersey Division of Revenue New Jersey Division of Revenue F Formed in January 1997 F Tax and revenue functions transferred from vDivision of Taxation vDivision of Motor Vehicles vDivision of Commercial Recording vDepartment of Environmental Protection vDepartment of Labor F States Lock Box for revenue collections F States Imaging Center F 1998 Inscript Customer of the Year - Capture 98

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08/12/99 -Page 5 State of New Jersey Document Processing System State of New Jersey Division of Revenue Tax Processing in New Jersey F New Jersey Division of Revenue processes all tax returns and payments from New Jersey taxpayers F 8.6 million total returns filed each year F 3.5 million personal income tax returns filed F 1.6 million personal income tax returns filed in April F Annual processing requires: v115 Permanent Staff v400 Seasonal Staff vOutside Contractor to extract and prep tax returns

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08/12/99 -Page 6 State of New Jersey Document Processing System State of New Jersey Division of Revenue Where we were F Processes were manual with traditional data entry F Aging data entry equipment with excessive maintenance costs F Heads Down data entry resulting in Repetitive Strain Injuries and lawsuits F Data entry operators were being paid incentive F Shrinking labor market of trained data operators F Increased demand to do more with less F Paper returns were kept in files and stored

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08/12/99 -Page 7 State of New Jersey Document Processing System State of New Jersey Division of Revenue Front End Modernization Project F Four Major Project Phases F Automated Mail Extraction (OPEX Corporation) vMPE 5.0 / System 150 / MPS 30 v6,000/hour vs. 150/hour F Replacement of Data Entry System to open architecture (Unisys/DCR) F Integration of Image Enabled Remittance Processing (Unisys/DP500) F Full Page Image Processing - Document Processing System (Logicon/Northrop Grumman)

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08/12/99 -Page 8 State of New Jersey Document Processing System State of New Jersey Division of Revenue Goals & Projected Return on Investment F Reduce seasonal employee hiring and salary expense F Less traditional data entry F Faster deposit of tax revenue F Faster refunds to taxpayers F Leveraging existing technology investment F DPS throughput of 38,000 income tax returns per day F Expand functionality to add new forms

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DPS Project Scope State of New Jersey Division of Revenue

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08/12/99 -Page 10 State of New Jersey Document Processing System State of New Jersey Division of Revenue Project Scope - Size & Processing F Process 4 million returns annually F NJ1040s received in April must be processed through DPS by May 31 F DPS will operate over 2 shifts / 14 hrs per day F 12 person hours are available for manned operations such as scanning and verify F DPS is available 24 hours per day for unmanned operations such as deskew, OCR/ICR, system backup F Net peak DPS requirement is to process 38,000 NJ1040s per day to achieve a maximum 6-week refund turnaround

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System Architecture State of New Jersey Division of Revenue

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08/12/99 -Page 12 State of New Jersey Document Processing System State of New Jersey Division of Revenue Functional Architecture F Image Capture F Data Capture F Data Export F System Services

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08/12/99 -Page 13 State of New Jersey Document Processing System State of New Jersey Division of Revenue Functional Architecture F Image Capture Subsystem vScan Tax Documents and Attachments vAssign a Document Locator Number and Form Codes vHandle Input Errors and Exceptions vMaintain Batch Integrity

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08/12/99 -Page 14 State of New Jersey Document Processing System State of New Jersey Division of Revenue Functional Architecture F Data Capture Subsystem vPerform OCR on Machine Print Text vPerform ICR on Hand Print Text vPerform Review and Repair for Low Confidence Recognition, and Math/Edit Errors vConvert Image Fields to ASCII Data

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08/12/99 -Page 15 State of New Jersey Document Processing System State of New Jersey Division of Revenue Functional Architecture F Data Export Subsystem vAccepts Tax Form Data from the Data Capture Function vReformats Data into Mainframe Output File Spec vTransfers Image Data to Backend Imaging System F System Services vOverall System Control and Process Flow vManages Workflow and Data Structures vHandles Batch Creation and Processing vMonitors Local Network Communications

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08/12/99 -Page 16 State of New Jersey Document Processing System State of New Jersey Division of Revenue DPS Architecture

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FormsForms State of New Jersey Division of Revenue

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08/12/99 -Page 18 State of New Jersey Document Processing System State of New Jersey Division of Revenue Forms Building Process - NJ1040 F Joint Project between State and Logicon/Northrop Grumman F Three Personal Tax Forms to Process vNJ1040 Hand Print vNJ1040 Machine Print vHR1040 Hand Print (Homestead Rebate Only) F State Establishes Policy and Form Rules F Joint Team Designs Forms F Northrop Grumman Implements Form and System Changes F Post-implementation Changes for Production

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08/12/99 -Page 19 State of New Jersey Document Processing System State of New Jersey Division of Revenue Forms Building Process F Hand Print NJ1040 Forms vTwo pages/Four form-sides vBarcodes (2-of-5 Encoding) on each form side vMultiple Registration Points on each Form-side vConstrained Boxes vNumber of Fields: 101 Page 1 - 33 Page 2 - 23 Page 3 - 19 Page 4 - 26 vName and Address Block Processing for both Label and Non-label Returns

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08/12/99 -Page 20 State of New Jersey Document Processing System State of New Jersey Division of Revenue Inscript Forms Definition F Hand Print NJ1040 v2 Physical Pages - 4 Recognized form-sides vOne FDF/form-side - 101 Total Fields vImplements 16 Math and 110 Edit Rules vRegisters forms using pre-printed registration marks vContains ICR and MarkSense fields vRecognition rate thresholds typically set at 85% vPage End Rule Block enforces cross-field validation vOutput file passes through specific Unix processes then on to the Verify function

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08/12/99 -Page 21 State of New Jersey Document Processing System State of New Jersey Division of Revenue

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08/12/99 -Page 22 State of New Jersey Document Processing System State of New Jersey Division of Revenue Forms Building Process F Machine Print NJ1040 Forms vSupports 35 Tax Software Versions vOne page/One side vLarge Scan Band Recognition Area vBarcode on Page 1 vScan Band Registration Corners vNumber of Fields: 101 vName and Address Block Processing of Machine Printed Address Data

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08/12/99 -Page 23 State of New Jersey Document Processing System State of New Jersey Division of Revenue Inscript Forms Definition F Machine Print NJ1040 vOne Physical Single-sided Page - One recognized form-side vOne FDF - 101 Fields vImplements 15 Math and 96 Edit Rules vRegisters form using corner of scan band vTwo-step Processing Column-mode Field-mode vPage End Rule Block enforces cross-field validation and syntax checking vOutput file passes through specific Unix processes then on to the Verify function

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08/12/99 -Page 24 State of New Jersey Document Processing System State of New Jersey Division of Revenue

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08/12/99 -Page 25 State of New Jersey Document Processing System State of New Jersey Division of Revenue Forms Building Process - WR30 F NJ1040 Success Builds Foundation for New Forms F DPS Now Processes Wage Reporting Forms (WR30) vWR30 Dropout Form vWR30 Plain Paper Spec (PPS) F Form Processed Quarterly v180,000 Employers file each period v144,000 single-page forms v36,000 multi-page forms result in 130,000 imaged pages v1.3 million employee records processed/quarter F Over 32 million fields recognized per year F States data base used to validate employer and employee data each quarter and reduce manual data verification

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08/12/99 -Page 26 State of New Jersey Document Processing System State of New Jersey Division of Revenue Forms Building Process F WR30 Dropout Form vVariable Number of Pages vMinimum One page/Two form-sides vFront-sides Pre-printed vAdd Employees on Back vBarcodes (2-of-5 Encoding) on each form side vMultiple Registration Points and Constrained Boxes vMax Fields/page: Front side: 68 and 100 Back side: 28 vPre-print 99 employees Max

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08/12/99 -Page 27 State of New Jersey Document Processing System State of New Jersey Division of Revenue

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08/12/99 -Page 28 State of New Jersey Document Processing System State of New Jersey Division of Revenue Forms Building Process F WR30 Plain Paper Spec (PPS) vMultiple Tax Software Supplier Versions vState-specified Printed Page Layout vMultiple, single-sided Pages vMaximum 99 employees vText-line Registration vMax Fields/page: 108

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Inscript Processing State of New Jersey Division of Revenue

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08/12/99 -Page 30 State of New Jersey Document Processing System State of New Jersey Division of Revenue Inscript Environment F Inscript 7.0 F Fourteen (14) Pentium 333 MHz F 128 MB RAM F Windows NT Server Platform F Operates 24 hrs/day

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08/12/99 -Page 31 State of New Jersey Document Processing System State of New Jersey Division of Revenue Inscript Performance Metrics F NJ1040 Page Processing Rates v1997 Rates - Inscript 5 Hand Print: 5-8 sec/page (4 pages) Machine Print: 14-20 sec/page v1998 Rates - Inscript 7 Hand Print: 2-5 sec/page (4 pages) Machine Print: 5-7 sec/page vAverage Rate Increase Range: 120-180 %

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08/12/99 -Page 32 State of New Jersey Document Processing System State of New Jersey Division of Revenue Inscript Performance Metrics F NJ1040 Field Recognition Rates v1998 Hand Print Average92.8 % Page 1 - 93.7 Page 2 - 85.3 Page 3 - 96.5 Page 4 - 95.1 v1998 Machine Print Page 1 - 98.1 %

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DPS Results State of New Jersey Division of Revenue

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08/12/99 -Page 34 State of New Jersey Document Processing System State of New Jersey Division of Revenue 1998 Volumes & Throughput F Scanning vExceeds 38,000 returns/day v10 images/return equates to 400,000 pieces of paper and images/day F Inscript Processing v90,000 Pages processed/day v26,000 Machine Print v64,000 Hand Print F Verify v38,000 returns/day v1/2 hour/batch vs. 2 hours/batch in conventional data entry

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08/12/99 -Page 35 State of New Jersey Document Processing System State of New Jersey Division of Revenue Projected 1999 Volumes & Throughput F Scanning v58,000 returns/day vNearly 500,000 images/day F Inscript Processing vNJ1040 90,000 Form-sides processed/day 3.8 M fields/day vWR30 64,000 Form-sides processed/day 800,000 fields/day F Verify v58,000 returns/day

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08/12/99 -Page 36 State of New Jersey Document Processing System State of New Jersey Division of Revenue Expanding Technology Base Sub-system19951996199719981999 Scanners 3 6 8 8 9 CPU Modules 1 2 6 6 6 Inscript Server 6 9 14 14 14 Verify WS 10 20 33 63 63

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08/12/99 -Page 37 State of New Jersey Document Processing System State of New Jersey Division of Revenue Peak Performance F Scanning v04/30/1998 50,300 page sized documents / 553,300 pages F Recognition v04/27/1998 5.7 million fields F Verify v04/27/1998 57,546 page sized returns F Image Committals v04/28/1998 895,906 pages v633,006 page sized / 262,900 coupon sized

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Next Steps State of New Jersey Division of Revenue

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08/12/99 -Page 39 State of New Jersey Document Processing System State of New Jersey Division of Revenue Processing Changes F Implement the 1999 NJ1040 Income Tax Form F Continue Processing Wage Reporting Form (WR30) F Integrate Key-From-Image Functions F Implement Page-size Remittance/Document Processing F Implement Senior Citizens Property Tax Freeze Form F Provide Imaging-based services to other state agencies as a result of consolidation efforts

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08/12/99 -Page 40 State of New Jersey Document Processing System State of New Jersey Division of Revenue Upgrade DPS Components F FormWare software vAdd Formware 2.5 Capabilities F System Software vOperating System vKodak Capture Subsystem F Expand System Configuration vAdjust for increased workload and throughput vAllow for additional levels of redundancy vAdjust for added functionality F Year 2000 compliance (complete 8/1999)