Oct. 1, 2013
The Honorable Mike Pence
Governor, State of Indiana State House, Room 206
Indianapolis, Indiana 46204
Dear Governor Pence:
I’m pleased to forward the annual
report of the Indiana Department of Revenue covering Fiscal Year 2013 (July 1,
2012 – June 30, 2013, hereinafter referred to as FY 2013), as required by
Indiana law (IC 6-8.1-14).
During FY 2013, the department
continued to focus on enhancing our service delivery, improving our controls
and governance structure, increasing taxpayer compliance, and preparing our
agency to deliver greater value to the State of Indiana. Here are some of our
key accomplishments.
This year saw a significant
increase in the filing and payment of taxes electronically. During the
traditional filing season of January through April 2013, the department
experienced a 6 percent increase in the filing of individual income tax
returns, achieving an electronic filing rate of 79 percent. This allowed us to
process returns faster than ever before, ensuring we get tax collections into
the state treasury sooner, and appropriate refunds into Hoosier pocketbooks
quicker to strengthen our economy. Speaking of refunds, during FY 2013 we
returned nearly $360 million to Hoosier taxpayers through the newly implemented
automatic taxpayer refund program, further spurring local economies throughout
the state.
During FY 2013, we implemented the
mandatory electronic filing of sales and payroll withholding taxes by our
business taxpayers. This resulted in the transition of an additional 45,000
business taxpayers to electronic filing, primarily using our INtax online
platform, and increased our electronic business payments by 24 percent over the
prior year. Electronic filing enhances the taxpayer experience while reducing
the department’s cost of processing paper filings and payments.
During FY 2013, the department
worked closely with Deloitte & Touche to complete a Controls and
Performance Audit. Their report validated the mitigation steps we implemented
to address the specific problems we suffered during the prior year and also
provided multiple observations and recommendations for the department to
address to further strengthen our internal controls and pursue best-in-class
performance. During FY 2013, we thoroughly reviewed their report and developed
action plans that we began executing, and will continue to execute, over
multiple years to achieve best in class status.
FY 2013 saw a significant increase
in the department’s collection of delinquent tax obligations. The department
collected $163 million in such taxes in FY 2013 compared to $154 million in FY
2012. We also consolidated and strengthened our outside collection efforts,
which will yield increased collection success going forward.
In FY 2013 the department moved the
Returns Processing Center operations into a new facility that allowed the
combination of our Return Processing Center, Motor Carrier Services, and the
Indiana State Police Motor Carrier Division into a single building. Smaller and
better organized than its predecessor, the new facility is more efficient and
will save the department more than $500,000 per year in operating costs, a
savings of 26 percent from prior years.
Additionally, the Returns
Processing Center completed processing timely individual paper income tax
return filings on May 5, 2013, a full week earlier than the year prior.
Customer Service continues to be a
priority at the department. Continuing our variable staffing model, we kept
phones open for an hour longer each day during the traditional filing season to
accommodate taxpayers.
In
FY 2013, the department’s Customer Interaction Center fielded more than 630,000
telephone calls – up 18 percent from FY 2012. In addition, the center managed
nearly 100,000 additional contacts via email, letters, and walk-ins.
The
Road Ahead
As
shared with you during the department’s presentation of our Roadmap for Indiana
– Moving from Good to Great, we are clearly focused on our strategic priorities
that will guide us over the next several years. Specifically, our strategic
priorities are 1) strengthen accuracy and reliability of processing and
reporting systems, 2) improve tax filing and regulatory experience for small
businesses, 3) improve taxpayer compliance yielding increased revenues and
creating a level playing field for all taxpayers, and 4) prepare our people for
sustained success.
We
continue to execute action plans to address the observations and
recommendations outlined in the Deloitte & Touch audit report. In addition,
we are continually identifying and implementing best practices to improve our
internal controls, technology platforms, and governance structures, which will
provide long-term benefit. Our control and technology modernization changes
continue to be important foundational building blocks for implementation of an
integrated tax system in the future.
Enhancing
our INtax online platform, working collaboratively with other state agencies to
develop a “one stop shop” business registration portal, and reviewing our
administrative regulations are examples of significant projects underway that
will favorably impact businesses as they interact with the department. This is
consistent with your “Cut the Red Tape” initiative, which enhances Indiana as a
great place to start and operate a business.
New
audit and data warehouse software systems and initiatives being implemented will
allow us to more effectively identify noncompliant taxpayers so that we may
direct our audit and collection attention to those parties. This will reduce
the burden
on those taxpayers paying their appropriate share and also increase revenues to
the state. This allows the state to continue to fund its necessary services
without having
to increase tax rates.
Finally,
the department has reorganized multiple groups within the organization; has
recruited a number of outstanding individuals, particularly in our finance and
information technology groups; and is actively addressing training and
succession planning initiatives to address our challenges today and also to
prepare for the future.
The
activities outlined in this report reflect our continued commitment to moving
the department from Good to Great! The measurement of our future success
remains providing exceptional customer service, effectively administering and
collecting tax revenues, and delivering reliable and useful financial
information to better serve the State of Indiana and our taxpayers. Thank you
for all the support you continue to provide.
