E-filing your taxes isn’t exactly a Web 2.0 technology, but it’s so much more convenient than manually filing paper returns that it deserves some recognition. Before I get into everything that’s great about e-filing I found an article that focused on a problem related to e-filing, which is the issue of IRS compliance. Currently, only a low level of compliance is required for tax preparation software, like TurboTax, TaxCut, and TaxAct. Yet it wasn’t surprising to hear that nearly 60 percent of all tax returns in 2007 were filed electronically. So, the potential and demand for improvement certainly exists for tax preparation software.
There are some obvious advantages to filing your tax returns electronically as opposed to manual paper returns. In doing some quick research I discovered that electronic returns have a higher accuracy rate than manually prepared returns, take half the time to process, and are cheaper to process. So, it seems that they benefit the individual as well as the government.
Currently, the IRS is pushing to increase compliance regulations for tax preparation software. Under the existing regulations, the IRS only requires tax software to pass the Participant Acceptance Testing System, which is a fancy way of saying that everything must add up correctly. The hopes are that by next year’s tax filing deadline a formal system will be implemented to monitor compliance and the accuracy of software guidance for users.
This year tax preparation software ranged from $25 to $150, so we may experience a price increase if the IRS requires stricter compliance within the industry. I could potentially view this as being a good or bad change. It’s good in the sense that increased compliance should mean more accurate tax returns. However, it’s bad in the sense that consumers really don’t have a comparable alternative to purchasing the software packages. In other words, I’m likely to pay whatever price TurboTax decides to charge for their product/service, because the alternative is completing my tax returns manually, which I’ve never done before and never intend on doing.
There are some obvious advantages to filing your tax returns electronically as opposed to manual paper returns. In doing some quick research I discovered that electronic returns have a higher accuracy rate than manually prepared returns, take half the time to process, and are cheaper to process. So, it seems that they benefit the individual as well as the government.
Currently, the IRS is pushing to increase compliance regulations for tax preparation software. Under the existing regulations, the IRS only requires tax software to pass the Participant Acceptance Testing System, which is a fancy way of saying that everything must add up correctly. The hopes are that by next year’s tax filing deadline a formal system will be implemented to monitor compliance and the accuracy of software guidance for users.
This year tax preparation software ranged from $25 to $150, so we may experience a price increase if the IRS requires stricter compliance within the industry. I could potentially view this as being a good or bad change. It’s good in the sense that increased compliance should mean more accurate tax returns. However, it’s bad in the sense that consumers really don’t have a comparable alternative to purchasing the software packages. In other words, I’m likely to pay whatever price TurboTax decides to charge for their product/service, because the alternative is completing my tax returns manually, which I’ve never done before and never intend on doing.
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