Paying to e-file? ? ?

I've never been a supporter of allowing private enterprise a free reign to charge customers for government mandated functions, but given IRS's record in software production, do we really want them in the tax prep software business? Last I heard, IRS personnel were still using commercial software (Tax Wise) for tax return prep.

Ancient history.....The savings are manifest in other ways. Over the past 7 or less years.

The clerks & TE's who were involved on processing paper returns in many centers were either laid off, or given meaningful replacement work, many in customer services, account adjustments, collection & Exam support centralized case processing. Many Area (fka District) offices reduced forces of the equivalent laborers to the centralized sites. In the long run the Service ~is~ saving more money than what is represented above.

In other words, the more successful the e-file campaign is, the more resources the IRS devotes to collection and audit. So in exchange for the "warm and fuzzy" one gets by making the tax system more efficient for everyone and saving the nation a few cents each return, one must balance the increased personal risk of an audit which will cost one many hundreds of $$$s simply to prepare for.

How much of that perceived "savings" is due to ERO's picking up the considerable cost of maintaining a mid-tier computing and networking infrastructure? After all, when I get a confirmation e-mail that my e-filed return has been received and accepted by the IRS, it doesn't come from the IRS. Who do you think pays for that?

-Mark Bole

First, I make my Federal tax payments on-line for no charge using EFTPS and it works very well. Second, I file Forms W-2 and W-3 on-line for no charge at

and that works well also. Second, no one is saying that the Federal government needs to write any software. All they need to do is establish a data format and secure data exchange standard (something that NIST does very well) for use by taxpayers using commercial tax preparation software. They don't even have to require that people selling tax prep software make their tax prep software compatible with the new, free, data format and data exchange interface, they just have to make it available. Some software companies will choose to make their e-file function compatible with the new free interface while others may not. We can then allow the free market to take care of the rest.

-- Vic Roberts Replace xxx with vdr in e-mail address.

Even more than the $4.28 to process the paper returns? Please provide statistics or a link. (Please note I asked nicely, if you don't have a link handy and don't want to "do my research for me" then please just ignore the request).

-- Drew Edmundson, CPA Cary, NC

Isn't this what we have now? The format is published and freely available to anyone wanting to use it. The only hurdle you don't mention is the testing IRS requires before the software can be used to file with them. My point is that the savings for the government aren't worth the entire e-filing process unless something has significantly changed since 1999. Even at 100% savings is less than $5 a return.

-- Drew Edmundson, CPA Cary, NC

"Drew Edmundson" wrote

The commissioners FY08 budget request overview, provides some detail.

Thank you for taking the time to respond. I see on page 5 an increased savings from e-filing of $6,479,000 for an additional 4,200,000 returns e-filed instead of on paper. This works out to $1.54 per return. Better than the 14 cents from 1999 but still nothing to get excited about. Plus it includes a half million business returns which are probably a larger savings than the 1040s. So for 133 million individual returns we have a savings of about $205 million. Not small potatoes to you and me but not even a drop in the bucket to the government. To me the real money will be when IRS can access all the extra information that comes in electronically beyond what is input from a paper filing. Then they should be able to perform additional analysis to detect errors, fraud, etc. Again, thank you for the link.

-- Drew Edmundson, CPA Cary, NC

[snip]

Good point! There is nothing preventing any of the tax prep software vendors from providing free unlimited e-file with their products.

-- Vic Roberts Replace xxx with vdr in e-mail address.

I read someehere it costs the IRS $6 per page to scan a printed tax return and $9 per page to have some offshore clerk keypuch in a hand printed return. So they are spending $54 dollars on my return to avoid $15. Thats pretty typical for the feds. I spending 63 cents to avoid $15.

I don't think it is fair to expect private businesses to provide services for free. It costs them money to modify their software to use electronic filing. Due to law changes and form changes, this is an annual thing. On the other hand, I believe they could charge less and still make a good profit. To be honest I think their best bet would be to just include it in the price of the software, adjusting that price appropriately. Those that don't e-file would be subsidizing every one else but that is common in other businesses. Believe it or not, some people don't eat the "free" bread at Macaroni Grill. All the add-on pricing also bothers me but it is common. Why does the $49.99 tire always end up costing about $60? The $79.99 cell phone bill is about $86.

-- Drew Edmundson, CPA Cary, NC

PC Magazine quotes an unnamed IRS official that the savings from e-filing is $1.60 per return. Was in the most recent issue where they reviewed online filing.

-- Drew Edmundson, CPA Cary, NC

Your sources are wrong. The savings is about $1.60 per return for e-filing versus paper. See my cites elsewhere in this thread. I don't have a cite but I don't think returns are sent overseas by IRS for keypunching.

-- Drew Edmundson, CPA Cary, NC

I wasn't suggesting that the software should be free. Just that some enterprising vendor would include enough free e-files to satisfy the normal user. (as you state below.) They would still make money from selling their software.

I agree.

Or extra charges at hotels for making a "800" number telephone call :-)

-- Vic Roberts Replace xxx with vdr in e-mail address.

The OP is confusing the return preparation of returns for accounting/cpa/tax prep houses. A couple of years ago there was a weekly news hour program exposé on the process. All the sources doc's, (W-2, 1099, etc) are scanned & secure emailed to an accounting sweat shop in the south Asia. They review the doc's then prepare DRAFT return & schedules, they secure email the returns the USA CPA who presents the documents to their client for filing, usually on paper to the IRS, but possibly some are E-filed. The IRS has not YET subcontracted the keying of data to NGO's either within or outside the USA. The day may come on that, no official site, just my humble opinion.

I don't know that they could legitimately subcontract (in the country or outside) any functions that would include having access to tax return information. It's against the law for them to disclose that information, after all. Stu

"Stuart A. Bronstein" wrote....

Yes, for the moment.

A new program: Private Debt Collection Program may be the beginning of the end for civil service clerical workers keying in data. Congress may pass legislation to end that which they previously mandated {allowing more Government work to be let-out to private contractors} OTOH, a few tweaks in the disclosure regs/laws/procs would allow it to happen.

against the law? Well now, remember that IRS has contracted with several outside collection agencies already to try and collect certain types of taxes. However the jury is still out on the efficacy of such and many tax pros thinks that it's just a matter of time before such collection efforts will be "contracted in" again. ChEAr$, Harlan Lunsford, EA n LA