In 2009, the IRS processed close to 95.5 million individual tax returns electronically, which is about two-thirds of all individual tax returns filed that year. According to a Government Accountability Office (GAO) study of March 2011, the IRS estimated that each e-filed return saved about $3.10. This results from the price comparison of $3.29 to process a paper return and only 19 cents to process an e-file Form 1040.
If all tax returns of 2009 had been electronic, the IRS could have saved about $148 million in processing costs for that year only. As IRS has expanded and improved its electronic operations, its savings have increased steadily year by year. Some time back, the Treasury Inspector General for Tax Administration (TIGTA) examined IRS efforts to modernize paper tax return processing. The report in September 2009 showed that it cost IRS 35cents to process an e-filed tax return when compared to $2.87 to deal with paper and paper-filed tax return, a $2.52 difference. This shows that the IRS savings increased by 58 cents per return in one year.
IRS Commissioner, Doug Shulman, declared last summer that an e-file return cost 20 times less to process than a paper return. This is probably why the IRS is urging and encouraging all to file their taxes electronically.
When the e-filing of tax returns commenced, it was simply a test project to gauge the public’s reaction and evaluate its costs. The entire e-filing system went live in 1990. By going electronic, the IRS has been able to process the returns faster, and achieve a significant level of revenue increase. The IRS spends almost 20 times less when processing an e-file return, as compared to paper filing. Ultimately, this leads to efficiency in its operations, and taxpayers having to cough less as far as maintaining the IRS operations are concerned.
During the 2012 tax filing season, taxpayers with 11 or more returns will be required to file their returns electronically. With this mandate in place, the IRS is set to achieve its 80 % e-file rate for personal tax returns.
With the e-file returns having clocked 1 billion, the IRS has indeed achieved notable achievements in the e-filing process. The system commenced 25 years ago, with only 5 taxpayers participating. At that time, the IRS could only process due refunds using the e-filing system. The IRS employees were engaged in a lot of manual processes, despite there being an electronic system in place. During that start-off season, about 25,000 e-file returns were processed. However, with the rapid developments of the IT world, tremendous improvements have been made to the system, and there is now very little human intervention in the e-filing process.
