The Good News and Bad News about E-Filing

E-file is the IRS system for submitting tax returns electronically. E-filing can be done through a paid preparer or by using a home computer (through commercial software or the FreeFile program).

Good news

The IRS reports that electronic filing for the 2008 filing season (2007 income tax returns) hit an all-time record. More than 86 million individual tax returns were e-filed, which accounted for about 60% of all returns filed. E-filing was up 12% compared with last year. However, e-filing has thus far fallen short of the 80% goal that Congress had set back in 1998 (it had hoped to have achieved this target by 2007).

Use of FreeFile also increased by 21%. About 4.6 returns used this no-cost electronic preparation and filing option that was generally open to those with incomes of no more than $54,000.

Bad news

The increased use of filing taxes electronically has created more exposure of taxpayers to identity theft and online fraud. For instance, the IRS learned of e-mail claiming to come from the IRS about the Economic Stimulus payment and telling recipients to click on a link and provide their banking information so the payment could be deposited in their account; in actuality, the identity thieves could use this information to get the taxpayers' bank funds.

The IRS detected 1,327 tax-related phishing sites thus far in 2008. For protection from identity thieves, the IRS warns taxpayers:

• Never respond to an e-mail that purports to come from the IRS. The IRS does not contact taxpayers via e-mail.
• Do not give personal information-on the phone, by mail, or online-to anyone claiming to be from the IRS; the IRS already has your personal information.

Reminder

If you have not filed your 2007 income tax return, you can still do so electronically. The IRS will accept returns (including those using FreeFile) submitted electronically through October 15, 2008.

Source: IR-2008-73, 5/28/08; IR-2008-11, 1/30/08, updated 4/30/08; and statement by IRS official