(Washington, DC) The IRS Oversight Board today released its Electronic Filing 2012 Annual Report to Congress. The Board estimates that individual e-filed returns grew by seven percent in 2012, breaking the 80 percent e-file goal set by the IRS Restructuring and Reform Act of 1998 (RRA 98). Approximately 119 million of individual income tax returns, about 81 percent, were filed electronically in 2012.
However, the IRS fell short of the subsequent goal established in 2007, in conjunction with the IRS Strategic Plan, that 80 percent of all major individual, business, and tax exempt returns be electronically filed by 2012. The Board estimates that the e-filing rate for all major tax returns was 71 percent, nine points below the established target.
Although the IRS did not meet the larger 80 percent goal for all major returns, the Board believes that steady progress is being made and expects the IRS to achieve this goal in the near future. Indeed, the total number of business and tax exempt e-file returns grew by a robust 16 percent in 2012. This increase was driven largely by the 27 percent growth in partnership and corporate e-file returns as well as the growth in Form 1041 estate and trust returns.
IRS Oversight Board Chairman Paul Cherecwich observed: “The IRS is to be commended for the progress it has made over the years in its electronic tax administration program. Reaching the 80 percent goal for individual e-filers is a major milestone for the IRS. It is the culmination of years of hard work and shows what can be done when Congress, the IRS and industry pull together and work towards a common goal.”
The IRS also made significant progress in other areas, such as the daily tax account processing for individual tax returns made possible by the standup of the Customer Account Data Engine (CADE) 2 program and the full implementation of the Form 1040 modernized e-file (MeF) application, which is now capable of accepting virtually all individual income tax returns. In addition, the IRS introduced an enterprise solution to the problem of e-authentication for IRS online services that is critical to the future of electronic tax administration.
This is not to say that challenges do not remain. In its report, the Board addressed some of the more prominent challenges. These include: (1) the need to significantly increase electronic filing of employment tax returns; (2) better detecting and combatting tax fraud, including tax refund fraud associated with identity theft; and (3) seeing the CADE 2 program through to full fruition so as to retire the antiquated Individual Master File system.
The full report can be found on the Board’s website at http://www.treasury.gov/irsob/reports