A federal requirement that the tax returns of large corporations be filed and processed electronically has resulted in cost savings to the corporations and the government, according to a new government report.
The report, from the Treasury Inspector General for Tax Administration, did not specify the amount of cost savings, however. TIGTA noted that in January 2005, the Treasury Department issued temporary regulations requiring corporations with assets of $50 million or more and that file 250 or more returns per year to e-file their corporate tax returns. In November 2007, the Treasury Department expanded that requirement to include corporations with $10 million or more in total assets. TIGTA’s audit found that this has reduced the costs and inefficiencies associated with manually processing paper returns, enhanced customer service and improved the availability of taxpayer information.
TIGTA’s audit found that e-filing by large corporations creates faster processing times and lower error rates.
“Our report found that corporate return e-filing has benefited both taxpayers and the Internal Revenue Service,” said TIGTA Inspector General J. Russell George in a statement. “I am pleased to see that the e-file program is providing meaningful results.”
The Inspector General also noted, however, that although IRS officials expected that e-filing would allow them to eliminate more compliant corporate taxpayers from the IRS’s audit stream, this key benefit has not materialized to date. In each of the fiscal years since mandatory e-filing was introduced for large corporations, a higher percentage (roughly one out of four) of corporate returns audited were closed with no adjustment when compared to any of the three fiscal years preceding the program’s introduction.
TIGTA made two recommendations in its report, with which the IRS agreed. TIGTA recommended that the commissioner of the IRS’s Large Business and International Division ensure that projects that take advantage of e-file data to enhance how returns are identified and selected for audit include methodologically sound plans in evaluating project outcomes.
TIGTA also recommended that the commissioner of the LB&I Division assess the current methods of promoting and sharing best practices for working with e-file data and use the assessment, as well as the observations in this report, to adjust current methods, as needed, to better meet examiner needs.
In response to the report, IRS officials said they plan to develop, document, and carry out evaluation plans to assess project results for workload selection processes. They also intend to assess the relative effectiveness of the LB&I Division's current methods of promoting and sharing best practices for working with e-file data and plan to record an improved Web-based training session for employee use.
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