Income Itemization via Financial Institution Data Processing
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Solution Overview
Problem
Determining income tax liability for income payments received through direct deposit is burdensome, complex, and time-consuming due to varying tax rates across states, cities, and counties, and the need to identify the location of work and type of work associated with the payment.
Innovation Solution
A system where financial institutions use information provided with direct deposits to determine state, city, and county income tax liability, providing income itemization and tax liability information to users via a computing device, allowing users to revise this information and using data extraction and processing software to categorize and summarize income tax obligations.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If manual determination of income tax liability is performed, then accuracy of tax calculation is improved, but time consumption and complexity increase
Solution Approach 1:
The system performs preliminary actions by automatically collecting work location information, income payment details, and jurisdictional tax rate data before tax calculation is needed. This pre-gathering of information eliminates the need for manual data collection during tax determination, reducing time consumption while maintaining accuracy through systematic data acquisition from multiple sources including employers and financial institutions
Solution Approach 2:
The patent introduces an intermediary system that acts as a mediator between various data sources (employers, financial institutions, tax authorities) and the user. This intermediary automatically retrieves and processes work location information, income details, and tax rates, eliminating the need for users to manually gather and cross-reference multiple pieces of information while ensuring accurate tax calculation through systematic data integration
2Loss of information
If comprehensive income itemization is provided, then user understanding of tax liability is improved, but system complexity increases
Solution Approach 1:
The system segments comprehensive tax information into distinct, manageable components including work location details, income payment breakdowns, applicable tax rates by jurisdiction, and calculated tax liability. This segmentation presents complex tax data in an organized, easy-to-understand format for users while the system handles the complexity of integrating multiple data sources and calculation rules behind the scenes
Solution Approach 2:
The patent applies local quality by providing customized tax information tailored to each user's specific situation, including only the jurisdictions and tax rates relevant to their work locations and income sources. This approach delivers comprehensive information necessary for understanding tax liability while avoiding unnecessary complexity by excluding irrelevant jurisdictions and data points for each individual user
3Productivity
If automated data collection is implemented, then time required for tax determination is reduced, but information security requirements increase
Solution Approach 1:
The system employs secure intermediary mechanisms that act as trusted intermediaries between data sources and users during automated data collection. These intermediaries implement encryption, authentication, and authorized access controls to protect sensitive work location and income information during transmission and storage, enabling fast automated collection while mitigating security risks through layered protection mechanisms
Solution Approach 2:
The patent applies parameter changes by transforming sensitive data into protected formats during collection and processing, including encryption of personal information, masking of sensitive identifiers, and secure hashing of tax-related data. These parameter transformations maintain the utility of data for tax calculation purposes while reducing security risks by making raw sensitive information inaccessible even if intercepted or improperly accessed
Data Source
AI summary
Information provided with a direct deposit, a deposited check, or other negotiable instrument may be used to determine state, city, county, and/or other local income tax liability. Based on information associated with the deposit, the financial institution may determine where a user performed the work that triggered the income payment, where the income payment took place, what type of work is associated with the income payment, etc. This information may be used by the financial institution to provide income itemization and income tax liability information to the user via a user computing device.