in electronic format to support their various program missions. Because of the high costs associated with processing paper submissions, (capturing and data perfection efforts,), most states do not process paper Forms W-2, Wage and Tax Statements. Consequently, this information is not available for state tax compliance purposes (either corporate or individual). Given these circumstances, the Federation of Tax Administrators (FTA), a member of CAG, became an active sponsor and supporter of this project. In 1991, the IRS/Social Security Administration (SSA) Policy Board agreed that the two agencies would explore the feasibility and merits of single wage reporting for Forms W-2 only, as a first step in reducing reporting burden on employers and enhancing the states' tax enforcement activities. Project Objective; The objective of this proof-of-concept project is to demonstrate/explore the technical feasibility as well as the economic merits of having SSA serve as the single location and principal processing agent for all Forms W-2 (paper, magnetic tape, diskette, etc.). The project was also intended to specifically identify the benefits that would accrue to the states to determine if they were sufficient to justify institutionalizing the project. The technical feasibility assessment will involve determining what changes SSA would have to make to its current systems to capture, purify (balance and correct selected errors) and forward to the IRS the transcribed Form W-2 data. The feasibility assessment will also involve determining what system changes IRS would have to make to process and distribute this data to participating states on a full cost-sharing basis. Based on the required system changes, SSA and IRS will develop cost estimates (start-up and recurring ) to fully implement this W-2 Single-Point Filing capability. The economic merits to be realized by institutionalizing this capability within SSA and IRS will be determined by estimating the potential impact (amount of burden reduction) on the business community as well as the benefits accruing to the states (increased revenue) by using

this data for tax compliance purposes. Current Business Process; Currently, employers are required to report individual employee wage tax withholding and other information annually to both SSA and to state tax agencies on paper, magnetic media, or vis telecommunications. The information reported is generally provided based on federal reporting specifications.. Future Business Process; Under the proposed Single-Point Filing concept employers would be required to file both federal and state wage and tax information (Form W-2 and Form W-3, Transmittals of Income Tax Statements) with a single organization/agent. That organization would in turn be responsible for processing and providing the data to the appropriate/ involved government agencies on a cost-sharing basis. Progress/Current Status: Each year starting in 1994 (for tax year l993 submissions) SSA has been capturing a number of data fields (ZIP Code, State Code, State Employer Identification Number, state Wages and State Taxes) from scannable paper Forms W-2, and passing this data (along with the Form W-2 data SSA normally provided) to the IRS. The IRS appends these specially formatted Form W-2 data records with address information, sorts, and distributes the records to the W-2 Demo Project participating states. For Tax Year 1996 this involved approximately 49 million records to 36 participating states. SSA has identified most of the systems changes needed to fully implement this capability as well a's estimated the cost (both one-time and recurring) for these changes. IRS has made similar determinations. State taxing authorities (through the leadership of FTA) are expected to provide estimates of the benefits (increased revenue) they would accrue from using this data for tax compliance purposes. This information is expected to be utilized to make a business case to institutionalize the project and how it would be funded. *****

STAWRS Home Page Gets a FACELIFT! Many of you have expressed an interest in the STAWRS Home Page. We are happy to report that the information contained in our Home Page is being significantly updated with a new version ready for release in the near future. The STAWRS Home Page currently contains information about the STAWRS Project as well as customer service information. The STAWRS Project portion is being updated to reflect information contained in our recently released Annual Report. It will also reflect the changes in STAWRS personnel which occurred over the last few months. We are giving the STAWRS Home Page a whole new look! Additional items which may be of interest are a bio on STAWRS new Executive- in-Charge and the STAWRS Newsletter under What s New." The STAWRS Internet address is http://www.ustreas.gov/treasury/stawrs/ main.htm The updated information will be available on this site by December 2, 1996. For more information on the STAWRS Home Page, please contact: Jo Lynn Arnold, Project Manager, Streamlined Customer Service on (202)535-5991 extension 326. ***** Filing 2010 The Future of State Income Tax Filing The following is an extract from a report issued by the California Franchise Tax Board (FTB) April 15 I996. "At the national level, FTB is building past collaborations with the IRS in the areas of joint forms distribution and taxpayer education. FTB is currently