Tax Department

Electronic Filing of Tax Returns


The Evolution of Electronic Tax Administration

Tax Department IRS e-file for Individuals: The IRS' involvement in Electronic Tax Administration began in 1986 with the first pilot of electronic filing which consisted of the electronic transmission of 25,000 individual refund returns from a handful of professional tax preparers through third party transmitters. Sixteen years later, IRS e-file programs have evolved so that approximately one out of every five individual taxpayers are now filing electronically. To facilitate this growth, numerous enhancements and features have been added to the program over the years.

After testing and piloting electronic filing, the IRS built its first fully operational system in 1989, receiving over a million returns the first year. A major enhancement was added to the program the following year when the IRS, in conjunction with the State of South Carolina, kicked off joint Federal/State filing which allows taxpayers to satisfy both their Federal and state obligations with a single transmission. Upon receipt of the electronic data, the IRS strips off the state data and makes it available for downloading by the states.

electronic filing


Allow more frequent deferral elections. Allowing participants to change their deferral percentages frequently gives them the ability to adjust their take-home pay to meet expected -- and unexpected -- expenses. When you provide the flexibility to stop and restart contributions more often, employees can feel more comfortable keeping contributions high during normal times, knowing they can cut back if they need the money for other purposes. In most cases, this means higher contributions overall.

In 2006, 73 million tax returns were filed electronically. Tax professionals filed 53 million and approximately 20 million were filed by individuals from personal home computers.

Why do taxpayers file electronically? For years, the success of IRS e-file has been attributed to the demonstrated benefits that it provides to taxpayers:

It's the quickest way to get refunds. Refunds are received in half the time, within 21 days - even faster with Direct Deposit.

Its accuracy rate of 99 percent reduces the chance of being contacted by the IRS. It provides an acknowledgment that the return has been accepted. It allows taxpayers in 33 states and the District of Columbia to file their Federal and state tax returns simultaneously. Nearly 70 Percent of Taxpayers Used IRS e-file in 2010. Nearly 99 million individuals filed their federal income tax returns electronically during 2010, a 3 percent increase in the IRS e-file rate. Of the 141.5 million returns filed so far this year, almost 70 percent were filed electronically.

Each year, more taxpayers chose to e-file their tax returns. Last year, nearly 95 million taxpayers or 67 percent used e-file. In the past decade, the number of individual tax returns e-filed has increased by 145 percent. The overall number of individual tax returns increased only by 8 percent. IRS e-file is no longer is the exception; now it is the norm.

Have you ever received a tax document that has bold print that reads "CONSULT YOUR TAX ADVISOR"?

Bring it to us! The reason for those disclaimers is because of the potential liability associated with providing tax advice. Providing tax advice is what we do. But please remember that when you are with your agent working on the current tax returns, if you have tax questions about the future, try to hold those until the end of the interview. Once your agent has gathered all of your information and keyed it into our computer system, he will have an updated snapshot picture of your tax and financial situation on his computer screen and will be better equipped to answer questions about the future.

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Cook and Co., Enrolled Agents are licensed by the U.S. Treasury Department to represent taxpayers before the Internal Revenue Service (IRS). Greg Cook is also an Accredited Tax Advisor and a Certified Public Accountant (CPA) licensed by the states of Alabama and Tennessee.