The Internal Revenue Service has reported a nearly 10 percent drop in electronic tax filing from tax professionals so far this season, despite a push by the agency to encourage more e-filing.

This year, the IRS is introducing a Free Fillable Tax Forms service that allows more taxpayers to file their taxes for free over the Internet. Unlike the Free File program, which gives low-income taxpayers access to free software from various tax prep vendors, the new service allows taxpayers of any income level to fill out the on-screen forms and file their returns electronically.

Perhaps because electronic filing is becoming more widely available to home computer users, the latest figures from the IRS indicate that tax professionals are doing 9.64 percent percent less electronic filing compared to last season, down from 13,007,026 in 2008 to 11,753,332 as of Feb. 2, 2009. Meanwhile, the number of electronic filings from do-it-yourself software such as TurboTax and TaxCut increased 9.69 percent as of Feb. 2, 2009, to 6,429,534 from 5,861,505 in the same period in 2008.

However, one company that services small CPA firms is seeing a 149 percent increase in filings. CCH Small Firm Services claims that it accounted for nearly one in five of the more than 11 million tax returns already filed with the IRS by tax professionals.

As of Feb. 2, 2009, CCH SFS had transmitted over 2.1 million individual tax returns to the IRS, 18 percent of the 11,753,332 individual returns the IRS reported receiving from tax professionals. The company’s ATX and TaxWise lines of tax software are being used by more than 75,000 tax preparation businesses and volunteer tax assistance sites this year.

“Our customers are small tax preparation firms, but they do a huge amount of business,” said CCH SFS vice president of marketing Gene Goldenberg. “We had our 23rd record sales year.” Meanwhile, the total number of Free File returns fell 34.28 percent as of Feb. 2, from 1,154,507 in 2008 to 758,702 in 2009. The number of accepted refund anticipation loans returns dropped 17.62 percent from 6,570,381 to 5,412,799.

However, Goldenberg cautioned that it would be a mistake to read too much into these early numbers or to interpret them to mean that the number of people doing their own returns is up more than those going to paid preparers. "The percentage of taxpayers using a professional has increased each of the past five years (to about 62 percent last year) and will increase again this year," he said.  "The numbers in the IRS report are simply reflective of some early-season filing trends."

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