IRS Finally Makes Electronic Tax Filing A 'Paperless' Experience

Mike Godfrey, Tax-news.com, Washington

04 January 2001

At last the IRS seems to be getting it right - it can't please all of the people all of the time but at least a few million electronic tax filers appear satisfied. This is because the IRS has finally made paper completely redundant in the electronic tax filing process. Of course the option for the paper-based format is still employed by the majority of US tax payers but now there is a true online alternative.

Previously tax payers who chose to send their returns electronically still had to snail mail a hand-written signed document, creating more time-consuming bureaucracy, but this has now been replaced with a digital signature in the form of a unique personal identification number for each individual. IRS Commissioner Charles Rossotti commented: 'People made fun of us: You've got electronic filing, but then you've got to file a piece of paper. It didn't make a lot of sense, this really makes electronic filing paperless.'

Last year a record high of around 35 million tax forms were returned electronically of which 30 million returns were from tax intermediaries and 5 million from people on their home computers. This year the IRS estimates that 42 million taxpayers will file their returns online.

The IRS is confident that its online e-file system will prove easier for most tax payers who have a computer, in fact it has plans to add a further 23 forms to the online files so that almost every kind of taxpayer can use the system. Acting IRS electronic tax director Terry Lutes explains: 'It's going to help growth because it gets us into taxpayers that haven't been able to do it before.'

According to an American Customer Satisfaction Index survey commissioned by the President's Management Council, 81 per cent of respondents said they intended to file again electronically: 'the survey findings support the IRS's own experience with electronic filing - that taxpayers who try it really like it, but we are working hard to improve service for taxpayers in all areas of the IRS', said Charles Rossotti. Futhermore, taxpayers with capital gains from mutual funds can now report gains online more simply than before without having to fill out more complex capital gains forms.

Further changes include the reduction of what the IRS calls the 'correspondence burden': these will allow the IRS to discuss problems directly with the tax intermediary whom the tax payer employs to file the returns on their behalf - about half of the 130 million returns due will be processed by intermediaries.

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