The Internal Revenue Service should be able to meet its goal of having 80 percent of tax returns filed electronically by 2012, four years later than originally planned, but only if the tax professionals who have resisted it make the transition, according to an oversight board. Congress set that goal for 2008 10 years ago.
About 58 percent of individual taxpayers filed electronically last year, the IRS Oversight Board also said in its annual report to Congress on e-filing that was released Feb. 6. E-filing reduces taxpayer errors along with IRS' costs and speeds refunds, the service has said.
“It is doubtful the IRS would have made such progress without the congressional mandate. [It] put real pressure on the IRS and its stakeholder to come together and take deliberate and focused action,” said Paul Cherecwich, chairman of the oversight board. Achieving 80 percent e-filing in 2012 now becomes a “definitive expectation.”
Providing other electronic services to customers based on specific needs and better protecting taxpayers and the tax system from fraud also will raise the rate of e-filing, the board said.
Congress must lift its ban against IRS’ requiring e-filing of individual tax returns and give the IRS the discretion to mandate that paid return preparers e-file if it is needed to reach the 80 percent goal, Cherecwich said. The service should explore all reasonable incentives to gain voluntary participation. The recommendation mirrors that of the Electronic Tax Administration Advisory Committee, another IRS advisory panel.
About 90 percent of individual tax returns filed in 2007 were first prepared on a computer, including nearly 99 percent of those filed through tax professionals. Only about two-thirds of the returns prepared on a computer are filed electronically. The service's challenge is to complete the conversion of a significant number of these electronically prepared returns into e-file submissions, Cherecwich said.
Some members of Congress have called for IRS to develop a free online e-file platform. However, that would increase the challenges and risks that IRS already faces and stretch its capacity in managing computer systems development, the board said in agreement with a recent finding from the Government Accountability Office.
The board instead recommended increased marketing for IRS’ Free File program, in which tax and software companies provide e-filing at no cost to a growing pool of eligible taxpayers.
IRS also wants to make its Web site, IRS.gov, the first place taxpayers go for obtaining information and services they need to comply with their tax obligations, Cherecwich said.
“This is good government at its best," he said. "The agency is adopting proven best practices and modern technology to deliver real-world benefits to taxpayers while reducing burden and costs for both taxpayers and government.”
The board also urged more and adequate funding for the Business Systems Modernization project and other e-services projects if business cases can be made for them.
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