E-Filing Saves the IRS $3.10/Return
As January winds down, you should have received most of the paperwork that you’ll need to file your taxes. If you’re like most FCN readers — and most Americans in general — you’ll be e-filing this year.
Sure, e-filing is convenient. But guess what? It’s also much cheaper for the IRS to process your return if you file electronically. As it turns out, it costs the IRS $3.29 to process a paper return vs. $0.19 for an electronic return — a savings of $3.10 (or nearly 95%!) per e-filer.
Looking back at last tax season, more than 100M individual federal tax returns were e-filed. Thus, the e-filing program saved well over $300M last year alone — not to mention an awful lot of paper waste.
Source: GAO via Don’t Mess With Taxes
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Modified on January 30th, 2012 - 9 Comments
Filed under: Taxes
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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January 26th, 2012 at 3:00 pm
so frustrating how long it takes the gov’t to take advantage of the internet. e.g. voting online.
January 26th, 2012 at 3:06 pm
That is exactly why it seems brain-dead obvious that the IRS should implement their own electronic filing system, rather than relying on third-party services (and forcing us all to pay for them). I’m sure they could come up with something for less than a few hundred million bucks.
January 26th, 2012 at 3:21 pm
If I owe, I prefer to file by paper and mail it in on april 15th (17th this year). It takes them a month or more to process the return, so i will make more in interest than the stamp and envelope cost.
January 26th, 2012 at 5:22 pm
The one thing I find most frustrating is that I have to pay to e-file my taxes. I’m no anti-government nut, far from it. But it irks me to no end that I have to pay to pay. There’s not a justification in the world for it. So when the IRS says it costs only $.19 to process an electronic return, they misunderstand that it cost *ME* $.19 to process an electronic return. It shouldn’t cost *ME* anything because *I* already paid for it!
January 26th, 2012 at 9:18 pm
TaxAct is free and includes free efiling (federal returns). I believe you will only pay if you upgrade to their Deluxe package which includes state filing. I highly recommend TaxAct, and have used it for years.
Back on topic: I’m amazed the IRS can process paper returns so cheaply. Have they offshored that job to Chinese sweatshops? (just kidding)
January 27th, 2012 at 10:32 am
TaxAct is outstanding. I paid for the Deluxe and e-filed both federal and state 2 days ago, the day after my W-2 came out. Last year when we filed it took a few days for the IRS to acknowledge receipt. This year it took about 10 minutes.
@Alex: “so frustrating how long it takes the gov’t to take advantage of the internet. e.g. voting online.”
How would you secure it and prevent duplicate voting? In the military we have a perfect system for that: Common Access Cards. These have chips in them with digital IDs, signatures, and encryption certificates tied to us as individuals. This means a system can guarantee that each use of a card can be traced to an individual.
It’s great for what we need, but I can’t exactly see the public demanding the government have the ability to track votes to individuals.
January 27th, 2012 at 11:20 am
If you’re getting a refund, it could save you plenty of time and money. My boyfriend’s parents are old-fashioned financially, and his father really just wanted to hold the check in his hand and physically see it before it was deposited in the bank. That’s fine and all, except it took over SIX MONTHS for them to finally receive their refund because the check was stolen and it had to be investigated by the FBI before they were able to have the check reissued. Considering that his father also sets his withholding to Single 0 so that he receives an even bigger refund, that’s a huge amount of money to sit around and wait for. If you’re already paying for a tax preparer to prepare your taxes, there is absolutely no reason not to e-file.
January 27th, 2012 at 12:37 pm
It seems to me that the IRS is (and has been) already taking advantage of the internet. They defined a spec for submitting tax data electronically, and set up services and servers for receiving them. They left it up to the free market to provide solutions available to the public. You can argue whether or not this is something they should provide themselves rather than leaving for private companies, but to suggest they’re not taking advantage of the internet is disingenuous. According to Wikipedia, the IRS has has e-filing since 1986 and a modernized version since 2003.
January 28th, 2012 at 2:11 pm
Agree with ‘STEVE’ that “…the IRS should implement their own electronic filing system, rather than relying on third-party services (and forcing us all to pay for them)”
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The other big problem with 3rd-party electronic filing — is that the 3rd-Party has access to all your highly private tax & personal data… even if you do your own taxes.
I use the H&R Block software ($15 at WalMart), which includes free e-filing. But I snailmail (USPS) my printed return… because handing over all my personal info to H&R Block is foolish… merely to save a few days in filing with the IRS.
Even generally trustworthy companies (like H&R) are vulnerable to all sorts of data hacks, errors, rogue employees, etc. The less people with access to your tax data = less privacy risk to you.
The IRS could easily accept e-files directly with simple, existing technology. But government bureaucracies move at a glacial pace. They don’t care — they don’t have to — they’re the IRS.