IRS Electronic Filing Systems Audit

The Treasury Inspector General released an audit report on the IRS electronic filing system. Some of the interesting facts in this report include:

  • The IRS destroyed an estimated 30 million paper 1099 type forms because of their processing backlog. Good thing we went through all the trouble to file them.
  • The percentage of business returns filed electronically is now up to 63 percent which is nowhere close to the 93% of the 1040s filed electronically.
  • The cost to process returns electronically is pennies vs multiple dollars. In the case of 1040s, it is 36 cents compared to $15.21 for example.

The bottom line is that the IRS is going to require more and more electronic filing of business returns, especially payroll tax returns. This is a good and bad thing from my perspective. Processing returns electronically means that we get an almost immediate acknowledgment without the hassle of certified mail. Additionally, it significantly reduces the IRS keypunch error rates in inputting paper returns. On the bad side, the IRS’s attempts at preventing id theft continues to make it harder for taxpayers to file electronically.