In 2003 46% of US Tax Returns were e-filed. Now, let’s fast forward to the year 2010 where 78% of all US Tax Returns were e-filed. That’s an incredible leap! That means more IRS agents available to answer your questions, right. Don’t hold your breath.
After reading these stats, three questions came to mind regarding this robust increase to our nation’s electronic tax filing.
- Does IRS deserve applause for promoting e-file services?
- Rather should we high-five private tax software companies, accounting firms, and the general public for their efforts in embracing the modern electronic tax system? (I would say, give all factions three cheers!)
- Now for the disturbing question… How many self-filed electronic returns were done correctly?
Why is this disturbing to me? Here’s why. I just picked up a client that is pretty intelligent. The tax return was 99% correct, using consumer tax software. He followed the software’s tax questionnaire, as I imagine most do-it-yourself filers do. Good so far. Let’s fast forward 2 years, this is where I come in.
In reviewing the audit notice and self-prepared tax return sent to me via PDF, I soon discovered that my client had incorrectly filled out the wrong column of one of the business forms. Although my client used the correct tax form, the figures were in the wrong column. This was an innocent error and was most likely due to my client not really understanding the tax forms nor the end result of the business deduction that he took. Tis one little error cost my client a few thousand dollars, interest, penalties, and a bunch of his precious time.
I always say to new clients, “within any 5 year period – my consulting fees will be paid for by my tax saving advice, or at least by keeping you out an IRS office.” I’m not advocating everyone use a tax advisor, but hopefully I’ve provided a pause for thought when it’s time to seek professional guidance.
Below are the rest of the 2010 tax return statistics recently published by IRS.
2010 Complete Report estimates:
- 142,892,050 Total, all individual returns filed
- 84,071,480 1040 returns
- 40,810,489 1040A returns
- 18,010,081 1040EZ returns
Estimates of returns filed electronically:
- 111,559,553 Total, all individual returns filed
- 62,427,066 1040 returns
- 35,419,288 1040A returns
- 13,713,200 1040EZ returns