The push by the Internal Revenue Service to get more taxpayers to file electronically seems to be working.
When the IRS first tried electronic filing - in a 1986 pilot program in three cities - only 25,000 computerized returns came in. But by last year, 42.7 million returns were computer-filed, and an additional 4.2 million were sent via the IRS's TeleFile telephone system, said Terry Lutes, IRS e-file director. The total amounted to 36 percent of all returns, Mr. Lutes said. More than 9 million were filed by individuals using their own computers.
E-fling permits refunds to be paid in 10 days or so, instead of weeks for paper returns, and the error rate is supposed to be less than 1 percent versus 20 percent for paper returns. Taxpayers who owe can file electronically early and not pay until April 15.
The IRS forecasts that 54 million returns, or about 40 percent of the total, will be e-filed this year. Five years ago, Congress set a goal of 80 percent paperless returns by 2007.
Many electronic returns this year are likely to be from Ohio and Michigan, two of six states whose residents are included in a new program involving 17 companies offering their services for free. Those who take advantage of it can save the normal commercial e-filing charges, which average $12.50 but can be considerably higher.
For residents of Ohio and Michigan, some of the participating companies offer free online filing to seniors, others to young people, some to low-income, and others to high-income filers.
FileYourTaxes.com offers free e-filing for federal returns for all Michigan residents, and eSmartTax.com offers free federal filing for all Ohioans regardless of income.
eSmart provides all federal forms for downloading free, and permits use of its Web site for filing state taxes, but charges $7 to $10 per return. C.C. Chen, president of the parent firm of eSmart, expects his company to handle 30,000 to 100,000 free federal returns for Ohioans.
Taxpayers can get information about the 17 Free File companies on the IRS Web site - www.irs.gov - which has brief descriptions of each, and links to each firm.
There is also a “wizard” that directs taxpayers to specific firms based on a six-question quiz.
Commercial preparers have been e-filing for years, and so have some accounting firms, and the idea seems to be catching on.
“Electronic filing is the wave of the future,” said Adele Jasion, a Toledo certified public accountant. “We have more and more clients electronically filing each year.”
The convenience, combined with having the refund direct-deposited in a bank account, means the money could be received within two weeks of filing, she said.
Still, the system is not perfect, said John Hills, a Toledo CPA. “It's not as convenient as it might be, because clients are required to inspect their returns before we file for them. We have to mail them a paper copy of their return, with an authorization form, which they must sign.”
E-filers have to provide an “electronic signature” whether they file on their own or at a tax service.
It can either be a self-select PIN number - based on last year's adjusted gross income - or a special form created for e-filing, Form 8453 or 8453-OL.
First Published February 24, 2003, 12:03 p.m.
