Delivering the goods

Just as millions of people are gearing up for tax season, it seems that electronic filing still isn't quite ready for prime time.

Building on last year's success — when some 35 million people filed electronic returns — the Internal Revenue Service expanded its pilot program to allow all taxpayers to file paper-free returns using personal identification numbers. And to make it even easier, the IRS allowed taxpayers to pick their own five-digit PINs.

But by early February this year, H&R Block — the nation's largest professional tax preparer — was reporting that 90 percent of its e-filing clients also had to send a paper signature via snail mail to back up the electronic documents.

Human error may be causing the problems, said Terry Lutes, head of the IRS Electronic Tax Administration. To register for a PIN, a taxpayer must provide date of birth and adjusted gross income and total tax amount from his or her 1999 return. If the information is incorrect, the IRS is not be able to verify the taxpayer's identity and the PIN won't work.

To be fair, more than 1.5 million people had the right PINs and successfully filed paperless returns. But that is not enough. The IRS plans to invest $15 billion in modernizing tax systems in a project dubbed Enterprise Architecture 1.0. The agency expects to save time and money through e-filing because, by eliminating the need for IRS workers to key information into a system, it will lessen the time for processing returns and eliminate human error.

For now the IRS has put human error back into the equation. Rather than place this program at the mercy of taxpayers' memory, the agency must take steps to gather and verify taxpayer information before people boot up their computers or head to professional tax preparers.

Sending a back-up signature is no big deal, but it defeats the purpose of paperless filing and lengthens the usual two- or three-day turnaround time the IRS boasts for e-filing refunds.

More important, the IRS needs to get Enterprise Architecture 1.0 right for its own sake. The first attempt at modernization in the 1990s crashed and burned after the service spent $3 billion on the effort. That's bad business and bad for taxpayers. This time, let's get it right.

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