Are paper returns a thing of the past? According to the IRS, over 100 million taxpayers filed their individual federal tax returns electronically in 2014. Most of us have forgotten the days in which we searched through large booklets making tedious calculations hoping that they were correct. However, almost 20 percent of taxpayers whom file individual tax returns still submit their tax returns on paper.
Three main benefits of filing your tax return electronically are that they are usually more easy to prepare when using your computer, you get your refund much faster by direct deposit and about three weeks sooner, and probably the most important, e-filed returns typically have fewer mistakes. According to the IRS, almost 20 percent of tax returns prepared on paper have mistakes such as missing information or incorrect tax calculations. But less than one percent of e-filed returns have errors. If there is a mistake on your return the IRS can notify you so that you may fix the problem in a matter of a couple days instead of waiting for a letter in the mail.
As you can see in the graph, 28 percent of the roughly 127 million individual tax returns were e-filed in 2000. We have come a long way since then. In 2014, out of approximately 149 million individual tax returns more than 125 million of them were filed electronically. *2013 and 2014 info has not yet been added to this graph*
Another reason the IRS wants us to file our tax return electronically is that it costs the IRS approximately $3.00 to process a paper return compared to about $0.40 for an e-filed return. This difference of roughly $2.60 adds up when you take into account that last year about 24 million individual tax returns where submitted on paper. That means it costs the IRS about $62 million in extra processing fees.
So, where do you think we’ll be in five or ten years from now? Do you think we’ll ever reach 100 percent?