E-filers Abound: Online Tax Filing Reaches Record Year in 2005

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The number of tax filers using IRS e-file is up by 2.1 million from last year. Growing awareness of e-file benefits, as well as improved tax preparation services, are related to the increase.

Tax filers are setting a new precedent in electronic tax filing as tax season passes the halfway point. This year, tax filers are using IRS e-file to file their taxes at a record-breaking rate. Industry experts relate this to increasing awareness of the many benefits of IRS e-file and improved services that make electronic tax filing easier and less time consuming.

Through March 4, the Internal Revenue Service reported that 39.2 million taxpayers e-filed their tax returns. This number is up by 2.1 million from last year. So far this year, 72 percent of the 55 million tax returns filed were e-filed. This is up from 67 percent last year. Taxpayers who self-prepare their tax returns using a computer had the largest jump in e-file use. The Internal Revenue Service reports that this number has risen by 14 percent over last year.

The use of IRS e-file is on the rise, paralleling the increase in tax refund amounts that taxpayers are collecting. According to the Internal Revenue Service, the average refund this year is $2,436. This tax refund amount marks a new record and is over $200 more on average than last year. This is a win-win situation for taxpayers who e-file and choose direct deposit—these taxpayers receive their tax refunds in half the time of those filing paper tax returns.

Not only may e-filers receive tax refunds in half the time it takes a printed tax return to be processed, but with IRS e-file, tax filers also receive confirmation within 48 hours that the IRS has received their federal income tax return. Additionally, less than 1% of e-filed tax returns contain errors, compared with up to 20% for printed IRS forms—taxpayer's information is directly entered into the Internal Revenue Service system.

Industry experts attribute the rise in e-file use to the increasing awareness and comfort taxpayers and tax professionals experience with IRS e-file. New improved tax preparation products make e-filing fast and easy and provide the added bonus of a rapid tax refund. One noteworthy IRS e-file resource is IRS.com, a site that has stayed up with the ever-changing tax preparation industry. Established in 1999, IRS.com has averaged over 10 million visitors each tax season and consistently provides access to leading tax preparation software, online tax programs and more. Specifically, the IRS e-file resource page on the site provides taxpayers with a wide range of information about IRS e-file and resources for them to quickly and easily e-file their taxes online.

The rise in IRS e-file use, namely among computer users, corresponds with another strong year in Free File use. By the end of February, the number of tax filers preparing and filing their taxes for free using the Free File program was up by 42.6 percent from last year. One notable Free File resource is FreeFile.com, a site that provides a variety of Free File and tax preparation options. This could assist at least 60 percent of tax filers which are eligible to file their taxes for free this year.

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Jackie Bates
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