IRS Pushes Electronic Filing
With the tax deadline creeping up, the Internal Revenue Service is stepping up its drive to get taxpayers to file their returns electronically. CBS MarketWatch Correspondent Stacey Tisdale reports on the pluses and minuses of e-filing.
The IRS is going all out to get more taxpayers to file forms electronically.
Last year, about 20 percent of all taxpayers filed that way. The IRS and Congress want 80 percent of taxpayers to use e-filing by the year 2007.
"It's an all electronic process, so certainly, there are cost savings with respect to us having to keypunch those returns, and the errors that are associated with that process, those savings can then be reinvested in other customer service initiatives," IRS spokesman Robert Barr says.
There are some advantages to e-filing:
- The error rate on returns drops from 20 percent to 0.5 percent because the math is done by computer.
- E-filing also means faster refunds. Taxpayers can get their refunds in about three weeks by filing electronically instead of six weeks when filing by regular mail.
- For no extra charge, refunds can be deposited directly into a taxpayer's checking or savings account.
However, there's more to e-filing than filling out a form and hitting send. Forms can't be e-mailed directly to the IRS.
Taxpayers need to buy a tax software package that can cost from $10 to as much as $30 or more for complex versions. An accountant can also file forms electronically - for a fee.
In addition, tax consultant Tom Ochsenschlager notes that e-filing doesn't apply to all taxpayers.
"You can't file an amended return, you can't do an extension of a return. Some of the forms that are needed for miscellaneous itemized deductions are not available electronically yet," Ochsenschlager says.
Ochsenschlager also says that the expediency of e-filing may not be particularly attractive for those having to make a tax payment.