Electronic Tax Return Filing
Are you standing in line today at the Post Office to mail your tax return to the IRS? The Internal Revenue Service is expecting your completed individual tax return (or an automatic extension request) for 2008 and today is the deadline. But paper and Post Office lines are so ... last century! The IRS wants your tax return ... but digital only please!
The number of returns filed electronically has grown dramatically over the past few years. Electronic, or e-filing, started in 1990 with 4 million returns and reached 90 million last year. Big number? Maybe, but it only represents 58% of individual returns filed and far less than the 80% goal set early this decade by the IRS.
Accounting firms and CPA's have been the driving force for much of the early adoption of electronic filing (which reached 40 million by 2001). In early 2009, new electronic filing options for individuals were made available online. The IRS is "selling" e-filing as a easy way to get a quick refund and is providing new free filing options. According to the IRS press release,
most taxpayers qualify for free tax preparation offered through Free File on IRS.gov. Regardless of income level, taxpayers who are comfortable with filling out paper tax forms and who don't need extra assistance can use the IRS's new Free File Fillable Forms. These new online versions of paper tax forms that can be e-filed are available for the first time by visiting the IRS.gov Free File site.
And the benefit to the IRS? Reduced workload of processing paper returns (remember that last years 90 million e-filed returns represents only 58% of individual returns). Approximately 10 service centers process these paper returns by opening the mail, physical handling and batching of paper documents, and manually entering data. Although error rates aren't published, errors happen! E-filing has the potential to eliminate many of these errors because most e-filed returns are computer prepared with built in checks, require no additional manual data entry, and are screened by the IRS e-file acceptance process.
In addition to the individual e-file initiative, the IRS is working on modernizing the filing systems for other taxpayers, including corporations and nonprofits.
The Modernized e-File (MeF) system was developed to provide a standardized format and standardized transmission methods for e-filed returns. MeF is a web-based system that allows electronic filing of corporate, partnership, exempt organization and excise tax returns through the Internet. MeF uses the widely accepted Extensible Markup Language (XML) format. This is an industry standard that is used when identifying, storing and transmitting data rather than the proprietary data transmission formats used by older e-file programs.
Advantages of the Modernized e-File system:
• Faster acknowledgements – Transmissions are processed upon receipt and acknowledgments are returned in near real-time.
• Integrated payment options – Refunds can be electronically deposited in your bank account or balance due payments can be electronically withdrawn from your bank account.
• MeF accepts supporting forms/schedules
• 24/7 transmissions
• MeF is completely paperless
• MeF supports previous-year filings as well as the current year.