The IRS has seen a bump in the number of individual tax returns filed electronically. Last year, 52,876,000 taxpayers sidestepped the Postal Service with their 1040s. The AP reports that the numbers are running about 5 percent higher this year. Tens of millions of taxpayers also qualify for free e-filing and preparation from one of sixteen commercial tax preparation services.
While the AP story is good news - among other benefits, e-filing lowers the costs of handling a tax return - it doesn't tell the whole story. The FY 2005 Budget (scroll to page 855) includes figures on the 2004 and 2005 IRS Performance Plan. The expectation is that the IRS will process 59 million individual returns electronically this tax season or about 45 percent of individual returns. That is a jump of nearly 12 percent from last year.
E-filing is another example of efficiency in government brought to you by the digital revolution. Like other digital technologies, it has an impressive penetration rate but it cannot, by itself, transform government. As evidence, despite lower unit costs for processing returns, the budget for the IRS continues to grow. FY 05 numbers are up 3.2 percent or $131,000,000 for the agency.