It’s hard to believe that in just twenty five years, the Internal Revenue Service’s online income tax filing, efile, has grown from processing 25,000 individual income tax returns annually to over 100 million.

The IRS efile has surpassed a landmark of 1 billion individual Form 1040 tax returns received and processed safely and securely. The electronic tax filing is arguably the most successful modernization program ever undertaken by the federal government.

In the 1980s, processing tax returns became increasing ineffective because of the complex, time-consuming and error-prone process of converting hard copy tax returns into a form that could be processed by machine. In addition, the IRS was facing a growing problem of increased cost and space to house the reams of paper forms and tax documents. And so the age of electronic tax filing was born.

The initial IRS efiling process was initiated by a tax preparer using a machine called a Mitron, which was a tape reader with a modem. The tax preparer would insert the tape into the Mitron to transfer the tax data. At the IRS, an employee would transfer the tape into a super mini-computer called Zilog.  Zilog would read the data and convert it to a format that the IRS’s Unisys system could process.

In 1986, the IRS launched it’s electronic tax filing pilot program. Five tax preparers in 3 cities participated, efiling 25,000 tax returns. Although the program could only accept simple returns that were due a refund, it was deemed a success and the pilot was expanded.

In 1987, 66 tax preparers used the online income tax filing system, filing 78,000 tax returns. That year, functionality was added to allow electronic Direct Deposit to put tax refunds directly in the bank accounts.

The following year, a technological update by the IRS to an IBM Series I processing system, eliminated the need for an IRS resource to plug the phone into a modem. Tax preparer interest in electronic tax filing exploded. 583,000 tax returns from 16 IRS districts were filed in 1988.

The efile program was expanded nationwide in 1990. 4.2 million returns were filed electronically.

In 1998, Congress passes a provision setting a goal of an 80% efile rate for all federal tax returns. The following year, efile functionality is added that allows electronic payments through credit cards and direct debit.

Efile becomes entirely paperless in 2002, when the IRS allows taxpayers to sign their tax returns electronically using a Personal Identification Number (PIN).

By 2007, more than 50% of all individual income tax returns were filed electronically (79.9 million).  And in 2010, that percentage jumped to 72% (93.4 million).

In 2011, Efiled returns cross the 100 million threshold in one filing season; cumulative total exceeded 1 billion returns. Approximately three out of every four individual tax returns were filed electronically.

source: irs.gov

Tax season usually heats up once that Groundhog Day is here. That’s usually the time you start getting your 2008 income tax information your income sources. 

But there is still two months yet before the deadline but time does fly. Before you know it you’re scrambling to get your federal income tax return done.

Filing one’s taxes electronically seemed like a novelty 10 years ago but accounts for almost six out of 10 returns today.

For the 2007 tax year that taxpayers filed a year ago, the Internal Revenue Service received almost 90 million by way of electronic filing out of a total 155.5 million returns.

And almost 27 million returns were filed from home computers, an increase of 19 percent from the previous year’s total of 22.6 million.

The options for free e-filing are increasing as well, said IRS spokeswoman Lea Crusberg.

For the 2008 tax year, which taxpayers will file by this year’s April 15 deadline, people with adjusted gross income of $54,000 or less – about 70 percent of all taxpayers – are eligible for free filing through the IRS in a partnership with some software manufacturers.

Last year, almost 4.8 million returns were sent through free-file, an increase of 24 percent compared with the previous year’s 3.9 million free-filed returns.

Federal Income Tax refunds are available in as few as 10 days from filing if the taxpayer provides the IRS with direct-deposit information.

Another route taxpayers might choose is through a paid tax preparer who also provides refund anticipation loans. That means the preparer will provide you with most of what your expected refund is for a fee.

The IRS said another benefit of its e-filing system is taxpayers can file now and if they owe money, pay later – up to the deadline of April 15.

“The IRS does not charge taxpayers to e-file their completed returns, but some tax preparers and software manufacturers may charge a fee. However, this year a number of large software companies are waiving this additional fee,” the IRS said.

E-filed tax returns are encrypted and taxpayers will receive an acknowledgement within 48 hours that the IRS has accepted the return.

The IRS also said that e-filed returns have an error rate of 1 percent compared with 20 percent for paper-filed returns.

So take advantage of free-filing federal income tax if you qualify. But if you don’t, take advantage of the online tax prep companies – in most cases, they are cheaper than going to an accountant.
source: beaumontenterprises.com