The IRS Wants You—Online - Government Activity

Home Office Computing, Dec, 2000 by Jeffery D. Zbar

NO DOUBT ABOUT IT: THE INTERNAL REVENUE Service is eager for you to pay your taxes online. To facilitate the adoption of its E-File for Business electronic filing program, the tax agency has sent 11 million small-business owners postcards stamped with unique e-filing customer numbers (ECNs) for use as "signatures" on returns filed electronically. In April, the agency launched an online filing option for quarterly federal tax returns, followed in June by a radio ad campaign aimed at breaking filers of the paper habit.

The effort follows the 1998 IRS Reform and Restructuring Act, which mandated the agency to boost its efficiency. The IRS hopes to have 6 million businesses file their payroll tax returns online by 2003, with 80 percent of all filing and payments done electronically by 2007, says Sherrill Fields, national director of the IRS's diversified electronic filing division.

By some accounts, the effort is working. Since last year, the IRS reports a 17.4 percent jump in the number of individuals and businesses filing tax returns online; online returns prepared by individuals (as opposed to tax professionals) jumped 94 percent, from 1.96 million to 3.8 million.

Overall, the IRS says, the Treasury Department's e-filing initiative signed up more than 2.5 million business taxpayers and is enrolling 6,500 more each week. The agency already accepts Forms 720, 940, 941, 943, 945,990-C, 990-PF, 990-T, 1041, 1042, and more electronically, and the Social Security Administration is testing a submission page for W-2 payroll forms.

E-filing can be done several ways. Off-the-shelf software is under development to give filers the required templates to complete an array of forms. Other companies such as Federal Liaison Services Inc. (www.flsinc.com) plan to function as application service providers (ASPs) for small companies' tax filings, says Federal Liaison vice president of government and special projects Connie Davis.

Companies like Nation Tax Online Inc. (www.nationstax.com) and C&S Technologies Inc. (www.esmarttax.com) also perform filing services for a per-transaction fee of around $4, Fields says. Once forms are converted to files, taxpayers must make payments either through their banks or the Electronic Federal Tax Payment System (www.eftps.gov), a service that has been in operation since 1995 and is now undergoing an Internet pilot test.

Either business owners or their tax advisors can prepare e-filing documents; the proprietor then reviews the documents, enters his or her ECN, and submits files electronically. The end result, Davis says: no trips to the accountant's office or post office to print, sign, or mail a document, plus 24-hour acknowledgment of the filing.

"The beauty of that is fairly obvious," Davis adds. "Tax compliance is not something that should take up much of your valuable time."