The last week has seen quite a few articles lamenting the lack of funding at the IRS. That lack of funding might drive the IRS to multi-generational lows in terms of the number of audits it undertakes (or at least based on the percentage of returns) in the United States, and might (further) reduce staff answering citizen calls for clarification on tax questions.
Enforcement and assistance aside (along with the legitimate concern that the IRS is tasked to do more things nowadays, such as determine eligibility for reduced cost health insurance) - there is one bright spot for team IRS: the massive drive towards the automation of the tax filing process over the last generation. In 1990, only 7.7% of tax returns were filed electronically.
In 2013? 85.05%.
E-Filing: A Bright Spot in the IRS Budget
Undoubtedly, IRS budged have been squeezed a bit since the IRS was tasked with enforcement of penalties and bonuses for the Patient Protection and Affordable Care Act. However, all of this comes at a time when more and more filing work has been moved to computers - both withholding information and returns - allowing automation of many tasks which previously required massive amounts of clerical work. Additionally, with more and more returns coming in electronically, the software which checks returns can be improved, flagging some more esoteric and complicated maneuvers which may have previously gone unnoticed.
On the flip side, complicated worksheets for common tasks like buying and selling stock (stock, of course, being owned by more than half of adult Americans!) can now be checked electronically, saving workers at the IRS from manually checking the sheets.
| Year | 1990 | 1991 | 1992 | 1993 | 1994 |
| All returns | 113,717,138 | 114,730,123 | 113,604,503 | 114,601,819 | 115,943,131 |
| Electronically filed returns | 8,755,040 | 11,296,173 | 12,504,804 | 14,090,837 | 11,902,576 |
| Percentage | 7.70% | 9.85% | 11.01% | 12.30% | 10.27% |
| Year | 1995 | 1996 | 1997 | 1998 | 1999 |
| All returns | [8] 118,218,327 | 120,351,208 | 122,421,991 | 124,770,662 | 127,075,145 |
| Electronically filed returns | 14,724,220 | 18,953,904 | 24,287,555 | 28,886,572 | 35,495,320 |
| Percentage | 12.46% | 15.75% | 19.84% | 23.15% | 27.93% |
| Year | 2000 | 2001 | 2002 | 2003 | 2004 |
| All returns | 129,373,500 | 130,255,237 | 130,076,443 | 130,423,626 | 132,226,042 |
| Electronically filed returns | 40,078,595 | 46,861,488 | 52,798,823 | 61,154,815 | 68,380,152 |
| Percentage | 30.98% | 35.98% | 40.59% | 46.89% | 51.71% |
| Year | 2005 | 2006 | 2007 | 2008 | 2009 |
| All returns | 134,372,678 | 138,394,754 | [11] 142,978,806 | 142,450,569 | 140,494,127 |
| Electronically filed returns | 73,471,852 | 80,095,643 | 87,851,490 | 95,243,204 | 98,358,434 |
| Percentage | 54.68% | 57.87% | 61.44% | 66.86% | 70.01% |
| Year | 2010 | 2011 | 2012 | 2013 | |
| All returns | 142,892,051 | 145,370,240 | 144,928,472 | 147,351,299 | |
| Electronically filed returns | 111,559,553 | 118,920,586 | 121,314,249 | 125,317,980 | |
| Percentage | 78.07% | 81.81% | 83.71% | 85.05% |
E-Filing
While the IRS is squeezed, E-filing is definitely a bright spot from an enforcement perspective.
In the future, look for even greater automation from filers, and improved screening from the IRS side; even if enforcement dollars are lacking, the IRS will surely become more and more efficient at tossing up red flags on questionable returns.
Keep that in mind before you hit the E-File button... won't you?
