Uncle Sam: Zap It to Me - Government Activity

Industry Standard, The, Feb, 2001 by Genia Jones

Paying taxes online may never be fun, but it's getting popular.

If you aren't filing your taxes via telephone or the Internet, you soon will be. At least, that's what the Internal Revenue Service is predicting. The agency forecasts that 56 million Americans will file their taxes electronically by 2007.

Last year, more than 30 million Americans submitted their returns online, and another 5 million filed over the telephone. Taxpayers in California were the most eager to abandon the paper trail: Golden Staters filed 3.2 million electronic returns, considerably more than Texas' 2.8 million e-filings.

For taxpayers, the biggest draw of electronic filing is the rapid refund. Taxpayers who mail in their returns might not see a refund for two or three months. But electronic filings usually produce refunds within two weeks, according to the IRS. For the government, the main reason to go paperless is accuracy. While 1 in 5 hand-completed tax forms contains errors, only 1 in 200 e-filled forms is inaccurate.

Most Americans who do their own taxes and opt out of paper returns prefer filing by phone to filing online. But that's changing quickly. By 2003,

Internet filings will take the lead. Still, most taxpayers who file electronically will do so through an accountant. Last year, 25 million Americans filed electronically through a tax preparer, up from 21 million the previous year.

                         The Net Becomes the Norm
                  Number of Electronic Tax Filers by Type
                         1999 2000 2001 2002 2003 2004 2005 2006 2007
Personal online filing    2.2  5.0  5.2  6.0  7.0  8.0  8.6  9.4 10.3
Telephone filing          5.7  5.2  6.5  6.3  6.5  7.0  7.0  7.0  7.4
Accountant online filing 21.2 25.2 26.0 29.0 31.0 34.0 34.0 36.0 38.0
Total                    29.1 35.4 37.7 41.3 44.5 49.0 49.6 52.4 55.7
IN MILLIONS.
SOURCE: INTERNAL REVENUE SERVICE, OCTOBER 2000