E-Filing Increases, As Do Tax Return Processing Costs

The IRS continues to encourage taxpayers to file tax returns electronically, hoping this year's total will reach 45 million returns, compared with 40 million returns for the 2001 tax filing season. But while the number of electronically filed returns has increased by 78% in the past four years, the number of returns filed on paper in the same period of time has only fallen 5%, according to a General Accounting Office report.

The cost of processing tax returns in the past four years has increased 11% according to the study. This is a result not only of the fact that the number of paper returns has not dropped dramatically, but there is a processing cost involved with e-filed returns, albeit the cost of processing electronic returns is smaller than that of paper returns.

Congress has mandated that 80% of tax returns will be e-filed by 2007. It is up to the IRS to make this possible by continuing to find ways to encourage taxpayers to file online and to make the process easier and more accessible.

The e-filing process has been improved in recent years with the deployment of credit card usage for paying taxes (currently Discover, MasterCard, and American Express are accepted). Taxpayers may also request that tax money be withdrawn from their personal bank accounts. Another major improvement in the e-file system is the ability for taxpayers to file completely electronically without having to sign a paper statement.

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