(Washington, DC) The IRS Oversight Board’s annual report to Congress on electronic filing, released today, credits the IRS for promoting a “broad vision of electronic tax administration” that goes beyond return filing. The Board’s report explores the IRS’ progress toward reaching the 80 percent electronic filing goal mandated by the IRS Restructuring and Reform Act of 1998 (RRA 98). Last year, approximately 54 percent of individuals e-filed their returns, up from 20 percent at the time RRA 98 was enacted.
The Oversight Board has consistently stated that the 80 percent RRA 98 e-file goal has been a major contributing factor to the growth in electronic filing, which in turn, has resulted in substantial resource savings for the IRS and burden reduction for taxpayers. It is the Board’s view that clearly-defined and measurable long-term goals “galvanize attention” and foster consideration of new strategies by both the IRS and key external partners in tax administration.
Despite the positive effect the electronic filing goal has made on the IRS and tax administration, the Board believes it is highly unlikely the IRS will achieve by 2007 the 80 percent electronic filing goal. Based on existing trends through 2006, it is unlikely that a sufficient number of taxpayers will shift to e-file in 2007 to overcome the 26 percent shortfall. However, because the goal has such a positive effect, the Oversight Board recommends Congress extend it to 2012 and expand its scope.
“While it is clear that the IRS will not achieve the ambitious 80 percent goal this year, we do not view this as a failure. Rather, the IRS and its private sector partners have achieved continuous and significant progress in all parts of electronic tax administration very much in keeping with RRA 98’s intent,” said Board Chairman Paul Jones.
Specifically, the Board recommends that Congress modify current law to match a long-term e-file goal the IRS proposed in 2006 where 80 percent of all major tax returns filed by individuals, businesses and tax-exempt entities would be transmitted electronically to the IRS by the year 2012. By broadening the proposed measure to also include major business and tax exempt returns, the IRS increased the challenge it would set for itself.
The report also expressed the Oversight Board’s concern over last year’s decline in the number of e-filed returns received from individual taxpayers who self-prepared their taxes, which has largely been attributed to the IRS’ decision to discontinue its TeleFile program and eligibility changes based on income for use of the Free File program.
The Board also offered its views on the key recommendations highlighted in the 2006 Electronic Tax Administration Advisory Committee report to Congress.
The complete IRS Oversight Board 2006 e-Filing Report is available at http://www.irsoversightboard.treas.gov.