1999 fta technology conference whose customer is it? perspectives of the payroll service industry...

1999 FTA Technology Conference

Whose Customer Is It?Perspectives of the Payroll Service

Industry

Automatic Data Processing, Inc.ProBusiness, Inc.


Outline

Industry Overview Industry issues affecting tax authorities Industry standards project to improve

accuracy and quality Recent state projects Changes to SSA formats for W-2

reporting Recommendations


Payroll Service Industry

National Payroll Reporting Consortium Top 12 represent over 700,000

employers Over 1/3 of the private sector work force Payroll tax payments & related reporting

Income Tax Withholding; W-2 reportingEmployment Security tax and wage reportingChild Support withholding New hire reporting


Payroll Service Industry: Pros and Cons

Efficient, highly automated Largest source of electronic filing

Income tax withholding payments, W-2s Employment Security Tax & Wage

reports New Hire Reporting

Significant edit controls Far beyond what employers would do

E.g., formats of all state employer IDs


Payroll Service Industry: Pros and Cons

Prime industry issue: Client indicative information Significant source of certain

errors . . . and staff irritation Much can be done to improve results

Data validation programs minimize errors


Typical Problem Areas

Filings with no identification number Employers in “Applied For” status (4 -

6%) Misposting - incorrect ID or other

element Wide range of results: .03% to 8.0%

Filings for inactive accounts “Zero” filings for live accounts that

change processors with no notice


Reliability of Data: What Matters?

Elements required to post filings, payments Employer identification number Secondary ID numbers; e.g., EFT IDs Entity name Required deposit schedule Required deposit method


Reliability of Client-supplied data

Most clients are NOT oriented to tax administration Unsure of assigned withholding ID#

Registration for employer IDs May occur at different times by

different people - key information (e.g., name) may vary

Clients forget to tell us when an ID is assigned


Reliability of Client-supplied data

Reliability of Deposit Schedule Data Often confused with payroll frequency E.g., monthly, semiweekly etc Most clients sign up in Fall (Oct-Dec)

Was the schedule provided this year’s or next?

May change annually or even midyearClients assume payroll services are

notified


How to improve results

Implement feedback mechanisms Prevalidate client data

So the first filing is error-free Notify us of any errors

To avoid subsequent errors


How to improve results

Implement validation programs Posting elements

Elements that vary by employer EIN, name

Elements that change periodically Required filing schedule or method

Provide the employer ID if missingReduce “Applied For” filings by 50%


Industry Standards Adopted

Notice of Power of Attorney Links employers to service providers Identifies subject matter, action

requested Functions as validation program Basis for electronic commerce with

agents EDI T/S 157 and fixed file format


Industry Standard - Notice of POA

Client list reporting SOP in many states

Manual, paper based . . . misses opportunity

Save postage and printing by suppressing unneeded tax forms

Turning point: Link employers to service providers Enables electronic commerce with agents


Industry Standards Notice of POA

Critical Link - Why & How Most service providers handle related

correspondence . . .but don’t get it directly

Establish agent ID on taxpayer database Points to an agent database

ID, Name, address, email & contact data

Electronic copies of correspondence to agents for fast resolution


Industry Standards Adopted

Standard process applies to many industries

Payroll & Tax Filing ServicesU.C. Claims AdministratorsEmployee Leasing Industry

See separate handout for explanation & proposed layout


EDI Issues - Minnesota Model

Key lessons learned 2 or 3 options needed

e.g., EDI, Web-based & file transfer

Lead time for implementation Acknowledgments a plus Address indicative data issues

Prevalidation, ID assignments etc


EDI Issues - Minnesota Model

Some problems remain Mainframe to PC is problematic

ASCII to EBCDIC & vice versaConversion of mainframe files; e.g., {cr}

File sizes/capacity13 files needed; 13 phone calls13 “ACK” files - coordinate to produce 1Can’t automate script due to delay


Minnesota Model

Some problems remain Delay in update of deposit data

Final deposits need 7-10 days to postReturns show as money due

Internet based model implemented Lead time a problem


Other Illustrations

Washington Employment Security Major format change - “de-

standardized” Convert all magnetic tapes to FTP

Security, platform, testing all issues

New Jersey Combined U.I./Revenue Filings Lead time a problem Changes to employer account numbers


New Magnetic Media Formats for W-2 Reporting will impact TY1999

Many states accept SSA “TIB-4” Format Format changed announced for 1999 State (“S” record) date fields expanded Changes entire “S” record layout

MMREF - new SSA format Major changes to all records Transition Years - 1999 - 2001


Recommendations & Incentives

Improve the current process Electronic copies of notices Proof of filing Prevalidation

Delay payment and/or reporting due dates

Revenue neutral Use Standards; i.e., ANSI X12/TIGERS


Recommendations

Improve information dissemination Websites are VERY helpful Announcements of changes

Consider how changes may impact your most highly automated clients

Let us know of major changes early NPRC can help assess impact, plan

and communicate


Perspectives on Electronic Filing

National Payroll Reporting Consortium

Automatic Data Processing, IncPeter Isberg

(973) 974-5779 [email protected]

ProBusiness, IncAndrew McDevitt

(925) 737-3196 [email protected]

1999 fta technology conference whose customer is it? perspectives of the payroll service industry...

Documents

notified slide

new hire reporting slide

payroll services

payroll frequency

withholding id

reporting recommendations

elements elements

filing schedule