The nation's tax collectors said Thursday that they received 5 million more electronically filed returns compared with the same time last year. That amounts to a 12 percent increase in tax returns filed electronically even before a flood of returns arrives during the last two weeks before the filing deadline.
The IRS expects to get enough electronically filed returns in the days leading up to the April 15th deadline to beat last year's record of 53 million e-filed returns.
Taxpayers filing their returns from home, using tax preparation software or an online filing service, marked the biggest increase. Home computer filers submitted more than 11 million returns so far, a 21 percent increase over last year.
Terry Lutes, a top official in IRS Information Technology Services, said the growth reflects taxpayers' increased comfort interacting with the IRS online. Millions of taxpayers have also used the IRS Web site to check up on their expected refunds.
"This isn't some experiment any more," he said.
Mirroring the increase in electronic filing from home, more filers used the free tax preparation software offered through the IRS web site. The free file program, in its second year, saw a 23 percent increase in participation. Taxpayers must meet certain qualifications to use the free tax software.
Lutes said the IRS expects to see growth exceeding 10 percent annually as more tax professionals adapt to the electronic system and more taxpayers purchase home computers and get comfortable using tax software.
The IRS probably won't make its congressionally mandated goal to get 80 percent of returns filed electronically by 2007, he said.
Tax software companies said they see more taxpayers using online services to file their returns.
Julie Miller, spokeswoman for TurboTax software maker Intuit Inc., said the company has seen sales increase faster in online tax preparation than desktop software sales. Intuit participates in the IRS free filing programs.
In past years, taxpayers who decided to file electronically used to be old fashioned paper filers, Miller said. Recently, the company has noticed taxpayers moving away from asking tax professionals to prepare their returns and are filing electronically on their own.
"I think a lot of it is based on the IRS putting some muscle behind increasing awareness," she said.
Craig Petz, a vice president at Petz Enterprises Inc., which runs the online tax preparation service TaxBrain, said that half of their users migrate to the Web from traditional paper filing. About 30 percent chose to use stop paying a professional and use the online service instead.
Petz said he would like to see the IRS do more to motivate taxpayers to file electronically by addressing taxpayers' concerns about electronic services.
"They need to be assuring the public about security and privacy," he said.
By Mary Dalrymple