Online Filing Surges in 2005
In the 2002 Congressional Report to the IRS’ Electronic Tax Administration Advisory Committee (ETAAC), the lofty goal to have at least 80 percent of all 1040 returns electronically filed by 2007 was set. So where does the IRS stand on this goal, and more importantly how are they going to accomplish it?

A True Player
Traditionally, most electronically filed returns have been developed by EROs using tax software packages. But online filing is quickly becoming a predominant player in the tax return arena. Once only a speck on the horizon, it has steadily crept to the forefront and is now growing five times faster than electronic filing using tax software.

E-File Statistics*
  2004 2005
Total returns
Total e-file returns
Total ERO accepted returns
Total online returns		 55,492,000
34,411,000
25,880,000
8,531,000 		54,566,000
36,911,000
27,155,000
9,756,000
* as of mid-March 2004 and 2005

Based on the above data:
• 67.6% of returns were e-filed in 2005
• 26.4% of those returns were filed
using online sites
• Returns filed by an ERO increased 4.9%
• Returns filed online increased 14.4%

The above numbers prove that online filing continues to gain strength and is quickly becoming a mainstream way taxpayers electronically transmit returns to the IRS.

It’s Time to Get Serious
With this year’s strong increase and online filing’s ease of use, should professional tax preparers see online filing as serious competition? With the IRS Free File Alliance and online tax sites providing electronic filing of federal and state tax returns for minimal cost, what can you do as a preparer to compete with these websites and get a slice of the pie yourself? Stay tuned for the next edition of Taxing Subjects to learn about some of the opportunities you have as a preparer to become part of the online filing trend. ‚

From April 2005