Treasury Inspector General for Tax Administration
December 4, 2013
TIGTA - 2013-56
Contact: David Barnes
WASHINGTON -- The Internal Revenue Service’s Modernized e-File (MeF) system successfully replaced the Legacy e-File system as the primary electronic filing (e-filing) platform for individual tax returns during the 2013 Filing Season.
That is the conclusion of a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
The MeF system is an Internet-based e-filing platform that provides a single method for filing business and individual tax returns, forms, and schedules via the Internet. It provides real-time processing of tax returns and extensions that will improve error detection, standardize business rules, and expedite tax return acknowledgments to taxpayers.
This audit, the seventh in a series issued by TIGTA since 2009, was initiated to determine whether the IRS successfully transitioned e-filing of individual tax returns to the MeF system for the 2013 Filing Season. TIGTA reviewed whether the MeF system received, processed, and posted individual tax return information timely, accurately, and effectively.
“The Modernized e-File project has been a labor-intensive effort lasting more than a decade to revolutionize the way taxpayers transact and communicate with the Internal Revenue Service,” said J. Russell George, Treasury Inspector General for Tax Administration. “So the latest fruit of this effort, the successful migration of processing all individual tax returns to this system and retirement of the Legacy e-File system, can certainly be viewed as a significant milestone for the Internal Revenue Service.”
As of May 4, 2013, the IRS received approximately 129 million e-filed Tax Year 2012 Forms 1040, U.S. Individual Income Tax Return, TIGTA found. The IRS accepted approximately 114 million (88 percent) of the 129 million tax returns and rejected more than 15 million (12 percent) tax returns.
The MeF system processed most tax returns correctly. TIGTA’s review of a statistical sample of 560 Forms 1040 tax returns received by the IRS from January 30 through May 4, 2013, found that 558 tax returns (99.6 percent) were processed correctly. TIGTA found that the MeF system did not identify the remaining two tax returns for taxpayers who appeared to have a requirement to pay self-employment tax but did not pay it.
Further review of the tax returns with qualifying self-employment income on Schedule C, Profit or Loss From Business, filed from January 27, 2013, through June 29, 2013, for which the taxpayer did not pay self-employment tax, identified additional taxpayers with self-employment income for whom IRS records showed that they were not exempt from paying self-employment tax.
TIGTA recommended that the Commissioner, Wage and Investment Division, identify and correspond with all taxpayers who claim qualifying self-employment income but pay no corresponding self-employment tax when there is no indication that the taxpayer has an exemption from paying the tax to obtain a Schedule SE, Self-Employment Income. The Commissioner, Wage and Investment Division, should also initiate a program to correspond with the taxpayers TIGTA identified to obtain a Schedule SE and ensure that the proper amount of self-employment tax is assessed.
The IRS agreed with TIGTA’s first recommendation and plans to review existing processes and consider reducing the tolerances to address more taxpayers who claim qualifying self-employment tax with no tax paid and no indication of an exemption. The IRS disagreed with TIGTA’s recommendation to correspond with the 11,700 taxpayers TIGTA identified but plans to consider cost-effective alternatives to provide for optimal coverage at the time tax returns are processed.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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