The IRS plans to do business electronically with 80 percent of taxpayers by the year 2007.
The electronic filing goal is part of the IRS' new strategic plan for electronic tax administration, unveiled last week.
During this year's tax season, 24.6 million taxpayers, or one in five, filed electronically, including six million who used the TeleFile system. The IRS is launching a wide-ranging effort to get more of the nation's 120 million taxpayers to scrap their paper forms, said Bob Barr, assistant commissioner for electronic tax administration at the IRS.
The IRS will launch an advertising campaign, including placements on network radio and cable television, along with billboards and magazine ads, Barr said. The IRS reform act Congress passed this year allows the campaign. Before, the IRS was not permitted to use paid advertising.
The IRS will also work with tax preparers. Half of Americans pay someone else to do their taxes each year.
"We're working with [preparers] as if they are value-added resellers," Barr said. The IRS this year sent preparers a marketing kit on the electronic filing program, including decals that preparers can hang in their windows to promote the electronic program. "It's the kind of thing one would do if they were supporting independent resellers," Barr said.
During the next filing season, IRS will also allow taxpayers to pay their taxes by credit card. Taxpayers can also authorize the government to deduct tax payments directly from their bank accounts.
The IRS is also pilot testing a project that would allow taxpayers to use a PIN code to serve as their signatures on electronic tax returns.
Taxpayers who file electronically can get their refunds in half the time of those who file by paper. Electronic returns are also more accurate. About 20 percent of paper returns have errors, including those introduced by the IRS when employees key-punch returns into IRS computer systems. Fewer than half of 1 percent of electronically filed returns have errors.
The IRS is still developing a financial model to accurately gauge how much cheaper electronic returns are than paper returns, Barr said. In a 1996 the cost of the two types was about the same. The cost per electronic return will go down as more people file electronically, Barr said, because the variable costs per paper return are much higher.
The IRS will update its electronic strategic plan every June. Copies of the plan will soon be available on the IRS Web site.
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