GAO to IRS: Mandate e-filing for tax preparers

GAO report on savings opportunities

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The Government Accountability Office recommends that Congress require paid tax preparers to electronically file tax returns in an effort to reap more savings, according to a new report.

If 90 percent of tax preparers’ paper returns were filed electronically, savings could reach about $68 million per year, according to GAO’s Nov. 15 report.

The “IRS is missing an opportunity to generate additional savings,” the report states.

Similar state mandates and a federal mandate requiring large corporations to e-file are successful, the GAO report states. In a Nov. 3 speech, IRS Commissioner Mark Everson said e-filing by corporations and large nonprofit organizations has worked. State mandates for paid tax preparers meeting certain criteria have increased e-filing in eight of the nine states with the mandate, the report states.

The IRS’ e-file growth rate in 2006 slowed, due in part to a drop in use of the Free File program, according to the report. In September, the Treasury Department’s inspector general for tax administration reported that participation decreased by 23 percent this year.

Nevertheless, GAO acknowledged that the IRS lacks the authority to order such an e-file mandate.

As the IRS continues to modernize, it needs to tell Congress about the benefits, such as timely refunds and savings, resulting from its new processing system known as the Customer Account Data Engine as well as e-filing, GAO said. Sharing the figures will help lawmakers when they are deciding funding amounts, the report states.

Everson agreed with GAO’s recommendations, according to his response letter included in the report.

However, the IRS said that, from now on, converting new taxpayers to e-filing will be more difficult. Taxpayers who would shift to e-filing most likely have done so already, the report states.

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