The Electronic Tax Administration Advisory Committee (ETAAC) has filed its annual report to Congress. The report notes that the low number of electronically-filed employment tax returns continues to be an obstacle for the IRS in meeting its goal of an overall 80% electronic participation rate for all major types of tax returns. ETAAC estimates that only 24% of employment tax returns (Forms 940 and 941) will be filed electronically in 2011. This percentage is lower than the percentages for all other types of tax returns [Publication 3415, ETAAC Annual Report to Congress, 6-2011; IR 2011-68].
To increase the number of electronically-filed employment tax returns, ETAAC believes that the IRS should: (1) increase its education and outreach; (2) expand its promotion of software and service providers that provide a free Forms 94X e-filing capability; (3) work with tax filers, and software and service providers, to review the end-to-end Forms 94X registration and e-file processes, and identify easy-to-implement improvements; and (4) investigate the most cost effective ways to increase the electronic filing rates.
The report mentioned that ETAAC conducted a survey to gain insights on this issue from the two main components of the employment tax return filing community: (i) in-house tax filers (employers that file employment returns on their own behalf), and (ii) employment tax service providers (payroll firms, accountants, tax preparers, bookkeepers, and others that file employment returns for third parties). Respondents who don't currently file employment tax returns electronically were asked what would make them reconsider. The most popular answers were: (a) if there was a free online filing method; (b) more training was provided on the Forms 94X electronic filing registration process; and (c) the overall employment return electronic filing process was easier and more user friendly. Many respondents noted that they can electronically file their state employment tax returns for free.
The IRS Oversight Board issued a similar report earlier this year.