IRS e-file system turns 25

Today is Tax Day and many a procrastinator is descending upon their Post Office branch in a mad dash to beat the deadline. However, their numbers are but a fraction of what they were a quarter-century ago, thanks to the remarkable success of what started in 1986 as a three-city IRS pilot program called e-file.

A drop-in-the-bucket 25,000 tax returns were filed electronically that first year. In 2010, almost 98 million returns - or just north of 70% --were submitted through e-file.

The program went national in 1990 and has seen a steady growth in participation virtually every year since. Nevertheless, 41.2 million paper returns were filed last year.

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Today is Tax Day and many a procrastinator is descending upon their Post Office branch in a mad dash to beat the deadline. However, their numbers are but a fraction of what they were a quarter-century ago, thanks to the remarkable success of what started in 1986 as a three-city IRS pilot program called e-file.

A drop-in-the-bucket 25,000 tax returns were filed electronically that first year. In 2010, almost 98 million returns - or just north of 70% --were submitted through e-file.

The program went national in 1990 and has seen a steady growth in participation virtually every year since. Nevertheless, 41.2 million paper returns were filed last year.

What started as a cost-saving measure continues to be one today, as the IRS estimates that it spends $2.87 to process a tax return filed the old-fashioned way, as opposed to only 35 cents for one submitted through e-file.

E-file promises refunds in as few as 10 days (my own rests within that window), whereas paper plus snail-mail can be expected to take four to six weeks.

While the majority of electronically filed returns are submitted by professional tax preparers, the number of individuals using e-file on their own has also risen steadily. Last year, about 34.7 million do-it-yourselfers filed this way, representing about 35% of electronic returns.

Finally, beginning this year, a change in the law will mean that many professional tax preparers will have no choice but to use e-file. Only those who process fewer than 100 returns are exempted, and next year that threshold drops to 11.

Those crowds at the Post Office are only going to get smaller.

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