E-Filing as an Efficiency Winner

Electronic tax filing doesn't just save stamps. Delivering tax returns via digits and data centers instead of envelopes and trucks is just part of the picture. To get the full picture, don't think of your tax return. Think of General Electric, which historically has the most largest tax return in America.

"General Electric used to deliver their return in an 18-wheeler truck," recalls Tony McMahon, the director of Enterprise Computing Centers for the IRS. Instead, GE's return is now sent electronically using the XML format, as is mandatory for corporations with more than $10 million in assets.

A total of 94 million returns were filed electronically in 2009, up from 79 million in 2007 and 88 million in 2008. About 45 million paper returns were filed last year.

"Electronic filing has been our bread and butter," said McMahon, who described the process in a presentation earlier this month at Data Center World in Nashville. "It's done great things for us."

E-filing is a huge efficiency win for the IRS, as every return filed electronically reduces the load and expense for the inefficient manual systems required to hand-process a filing.   

Here's an overview of the steps the IRS uses to process a traditional paper tax return:

The process is very different for tax returns that use e-filing:

Error reduction alone offers a compelling reason to file electronically. "It helps our processing, and it helps the taxpayers," said McMahon.