E-filing in 20th year with more taxpayers abandoning paper

2/14/2006

As long as she can remember, accountant Kelly Pettit has filed tax returns one way.

"I've always done e-filing," said the owner of Yeager Pettit & Associates in Toledo. "It's quicker and the clients get their refunds quicker. Most people today request it."

This year is the 20th anniversary of the Internal Revenue Service's electronic-filing program.

More than 68 million tax returns were filed electronically last year.

The IRS pushes e-file because it is more convenient for the agency to check returns, and the returns filed electronically don't have the mathematical errors that paper returns do. Also, people who choose direct deposit receive their refunds in half the time as paper filers.

The most popular e-filing method is through tax preparers, followed by over-the-counter software and Internet programs.

The IRS does not charge for e-file, but some tax preparers and software manufacturers do.

IRS Free File, a partnership between the IRS and some software makers, will offer free tax preparation and e-filing for taxpayers making $50,000 or less.

E-filing allows filing both the federal and most state returns at the same time.

The program started in 1986 as a pilot project in Cincinnati, Phoenix, and Raleigh-Durham, N.C. That year, 25,000 tax returns were filed that way.

"Last year was the first year ever that more people filed an electronic file than a paper return," said Chris Kerns, an IRS spokesman.

Congress wants 80 percent e-filing by 2007, he said, but added: "I don't think we'll get there."

The IRS has Electronic IRS, a centralized source for all of its electronic options. Taxpayers and tax preparers who click on the Electronic IRS logo, at www.irs.gov, will be taken to a page that contains an overview of what can be accomplished online.

That same site permits filers to access "Where's My Refund?", find an IRS e-file provider, check eligibility for the earned income tax credit, download tax forms, or sign up to pay electronically.

"The big thing that we know is once [taxpayers] try electronic filing, there's a 90 percent return rate," said Mr. Kerns.