About 81 percent of individual income tax returns were filed electronically in 2012, the IRS Oversight Board reported in its annual report to Congress.

 

The Internal Revenue Service Restructuring and Reform Act of 1998, however, set forth the 80 percent goal for all major individual, business, and tax-exempt returns by 2012. The board estimates the e-filing rate for that broader group of returns to be 71 percent.

 

"Nevertheless, the board is generally satisfied with the overall steady progress being made in the percent of major tax returns filed electronically, which grew more than four percentage points between 2011 and 2012, and which the board expects to reach 80 percent in the near future," the report said.

 

The initial goals were challenging, the board states, praising Congress, the IRS, tax preparers, and individual taxpayers for the high rate of electronic filing. "This milestone reflects the culmination of years of effort, innovation, and adaptation," the report states.

 

"In 1998, about 29 million individual, business, and tax exempt returns were filed electronically with the IRS, while over 135 million returns were filed on paper. However, for 2012, the board estimates that over 136 million tax returns will now be filed electronically, compared to approximately 56 million filed on paper."

 

The benefits of e-filing are many, including faster refunds, improved accuracy, confirmation that the tax return has been received, and lower processing costs for the IRS. Also, surveys show that individuals who file returns electronically are much more satisfied with the process than those who file on paper.

 

Other advancements for 2012 include the start of daily tax account processing for individual returns and full implementation of the Form 1040 Modernized e-File (MeF) application. The report noted that not all developments last year were positive, as refunds for about seven million taxpayers early last year were delayed about a week. The computer glitches were corrected by February, the report said.

 

Challenges include: increasing the electronic filing of employment tax returns, limiting tax fraud, including schemes based on identity theft; and improving computer systems. The entire report can be found on the IRS website.