Heartened by the increasing numbers of individuals filing income taxes on-line, the Internal Revenue Service has turned its sights on boosting the rate at which small businesses file tax forms electronically. But before they can entice businesses to take the electronic plunge, officials at the agency say they are getting their own house in order by offering forms electronically and by stepping up efforts to work with the outside software developers who are writing the needed programs.
"We want to partner with the software developer community to promote single-point filing in a suite of tools for employers' offices," said Midori Morgan-Gaide, executive-in-charge of the IRS's Simplified Tax and Wage Reporting System. "I think the business community will be very pleased" with their efforts, said Morgan-Gaide, speaking Wednesday at a packed conference for business software developers.
The lack of a single point of filing for all business-based tax returns is a key impediment to encouraging small businesses to file on-line. While 30 million of the 117 million individual tax returns were filed electronically this year, less than 1 million of approximately 80 million business forms were filed electronically.
In addition to promoting software tools that permit businesses to file and pay all their major taxes-unemployment insurance, employee withholding, and corporate income tax - in one place, the agency is also touting streamlined on-line customer service and hoping to encourage states to harmonize differing tax laws.
Software developers say that the IRS's size and bargaining power has made working with the agency a frustrating experience despite the agency's customer-friendly lingo. Together with the higher state and local taxes paid by small businesses, this attitude has led many companies to work more closely with state revenue agencies in developing the needed software.
Bowing to the reality that its computerized systems may not play as prominent a role in e-filing by businesses than by individuals, Morgan-Gaide touted two pilot projects by Iowa and Montana for electronically receiving employers' quarterly returns-that then passed withholding information to the IRS.
"I think it's wonderful that the IRS is going to provide emphasis" on the business-software arena, said Jonathan Lyon, a senior staff member at the Federation of Tax Administrators. "The states have made a number of strides in that area."
NEXT STORY: Budget Battles: Big numbers, same story