Sunday, March 25, 2001

One Third of Taxpayers to File Online

As the April 16 deadline for filing income taxes approaches, more U.S. taxpayers will be using the Internet to make it an easier process this year, according to Gartner, Inc. The Internal Revenue Service (IRS) estimates that more than 35.3 million taxpayers will file online this year, which represents approximately one third of all individual income tax filers. The number of e-filers this year is forecast to grow 20 percent from taxpayers who filed taxes online last year.

E-filing appears to be receiving favorable reviews, because 83 percent of previous e-filers say they are very likely to file online in the future. Gartner analysts said the average e-filer is a knowledgeable Internet user (online three or more days per week), is between the ages of 25 and 34, and is male.

"While there will be many former e-filers returning to do their taxes online this year, the IRS will have to prepare for many young e-filers who don't have a lot of experience filing taxes, let alone filing them online," said Christopher Baum, vice president and research director for Gartner, who specializes in e-government. "Consequently, the cost of support will likely grow as more taxpayers switch to filing taxes electronically. The IRS will have to ensure that it has the support staff to handle inquiries and electronic forms that are filled out incorrectly."

The IRS is taking some steps to make the process of filing online easier. This year, taxpayers are able to choose their own personal identification numbers (PINs) — in the past it was necessary to preregister with the IRS to obtain a PIN. "This self-selection process requires less time, effort and planning by taxpayers and thus motivates more taxpayers to file online," Mr. Baum said.

According to Gartner, the IRS would likely be more successful in encouraging e-filing by reducing or eliminating the average $13 fee that its third-party partners charge to e-file federal and state taxes. In addition, the 2.5 percent convenience fee added for paying with credit cards should be removed. Those fees are essentially taxes to pay taxes.

"It is unfair to charge taxpayers more to file online when the IRS will gain significant savings in processing costs through e-filing," Mr. Baum said.

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