IRS reports slight increase in e-filing rate

The Internal Revenue Service reported on Thursday a slight increase in the percentage of Americans filing their tax returns electronically, but the total remains far behind a congressional requirement to have eight out of 10 tax returns filed electronically by 2012.

Comment on this article in The Forum.About 60 percent of Americans filing tax returns in 2008 filed electronically as of May 16, up slightly from 58 percent in 2007 and 55 percent in 2006, according to the IRS. This year the tax agency was supposed to meet a congressional requirement to have 80 percent of all tax returns filed electronically, but Congress extended that deadline to 2012.

Despite the small increases in e-filing, IRS officials said they were pleased with the growth and progress of electronic filing. "The IRS has made great strides in harnessing the power of technology to do its work more efficiently," Commissioner Doug Shulman said in a press release. "The increase in e-file, particularly in the final weeks of the filing season, shows that taxpayers are continuing to recognize the benefits of filing electronically."

More than 86 million Americans filed their tax returns electronically in 2008, a 12 percent increase from 2007, the IRS reported. Self-prepared returns filed electronically rose 19 percent, and returns filed online by tax professionals increased more than 9 percent.

The total number of tax returns (either paper or electronic) that the IRS received in 2008 climbed almost 11 percent, partly because more Americans filed to receive the economic stimulus payments the agency currently is distributing.

E-file is becoming a more attractive option for late filers, who traditionally file paper returns. During the week of April 12 to 18, the number of electronically filed returns rose 28 percent from the comparable week last year.

"The phenomenon of lines at the post office, people lining up to mail their return, used to be so common year by year and is now diminishing," said IRS spokesman Eric Smith.

Smith said individuals filing early or expecting large refunds were the most likely to file electronically. Now people with returns that are more complex or who owe the government money are taking advantage of e-filing.

The biggest advantage of filing online is accuracy, Smith said, because tax returns filed electronically have 90 percent fewer mistakes than paper returns. Electronic filers also get an acknowledgement from the IRS when their return is received, something that doesn't happen for those filing paper returns.

Taxpayers also used the IRS' new Customer Account Data Engine, which replaced the decades-old Master File system, more often. The new customer account information system is part of the agency's business system modernization program launched in 1999. This year CADE processed more than 30 million returns, about 22 percent of all returns the agency received, which was more than double what it processed in 2007.

"We're able to put more returns on CADE every year, starting with the most basic" tax return, Smith said. "One of the things we're able to do is process more complex returns through the CADE system every year."

The most complex returns still are handled by the legacy system. Among its advantages, CADE allows users to post returns daily instead of weekly, as does the Master File system. In addition, it cuts the amount of time necessary to process a return and issues a refund in an average of five days.