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The History Of E file
Today, it's hard to imagine a world before e file. But back in the 1980s, the program was in its infancy, running with a skeleton staff and struggling to catch on. From an inefficient system at inception to the streamlined high-volume system of today, learn how e file came to be.
Humble Beginnings
Since the beginning of taxation, filing had been a complex and error-prone process because there was no good, guaranteed way to check human error. Forms could be lost, unintentionally filled out incorrectly, or have incorrect totals, all because of an accident. For many years, this was simply an accepted fact of life: there wasn't much that could be done apart from thorough checking. However, by the 1980s, the computer was becoming a clear and exciting alternative to human preparation. Computers offered an opportunity to check things more easily, and to organize information more effectively.
Tax preparers quickly jumped on the technology and began using it to prepare their client's taxes. However, the IRS had neither the infrastructure nor the program capability to process any kind of electronic submissions. Within a few years, the research division of the IRS realized that paperless tax processing could be a major advantage, and a pilot program was started.
The First E File
The first tax returns were filed electronically in 1986. The IRS wanted to run a study confirming the viability of electronic submission and asked tax preparers from around the country to volunteer as participants. They received a total of five preparers opting in, which led to a sample size of some 25,000 returns that first year. The process they had to follow was far from the streamlined filing approach of today. The preparer had to call the IRS to ensure that they were ready to receive every return, documents had to be transferred from a receiving computer to a processing computer by hand, and the preparer had to be called before an acknowledgement of receipt could be sent. The system was clunky and inefficient, but those first 25,000 returns proved a point: with improvements, it could work.
The Program Grows
After those first tests, the IRS experts agreed that there was definite benefit to pursuing efile. Here was a way to cut down on processing time, reduce errors, and potentially reduce the incredible amounts of wasted paper produced by the current mail-in option. More staff members were brought on board, and new programming developments helped further improve the performance of the program. In 1987, direct deposit became a component of the program. When taxpayers realized that their refund could be available in days rather than weeks, the number of people choosing to submit their data online grew dramatically.
In 1990, internet submission became an option for individuals nationwide. That year, 4.2 million returns were filed using the internet. Major prep companies began adopting the method. It gained popularity among independent professionals. It has continued to grow and become more accepted. In 2005, 50% of all returns were submitted electronically. In 2011, an estimated 75% of returns were sent online. Today, e file isn't the oddity that it was when first introduced. It has become an accepted part of daily life for many Americans, and for most, it's the preferred way of handling taxes.
Author is a freelance copywriter. For more information about how to E file, please visit Liberty Tax.
Article submitted Friday, February 10, 2012 & read 2 times.
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