The Internal Revenue Service must resolve several issues if it hopes to reach its goal of having 80 percent of all major types of tax returns electronically filed by 2012, says the Government Accountability Office.

The GAO, in a report dated March 7, says the IRS is behind pace for meeting the 2012 e-file goal. It may fall short if it does not address the regulatory and administrative cost concerns of paid tax preparers, revisit its interpretation of the word "file," and improve education and communication efforts for taxpayers, say auditors.

They add that Congress could expand the e-file mandate beyond those preparers who file tax returns by amending "paragraph 601(e)(3)(B) of the Internal Revenue Code by replacing the word 'file' with broader language, such as 'prepare or file.'"

As the language currently stands, in 2012 paid preparers who plan to file more than 10 individual, trust or estate income tax returns will be required to e-file. This presents a loophole in that the client could still file paper returns as long as the preparer does not submit them to the IRS.

The report also advises IRS Commissioner Douglas Shulman to consider whether or not preparers' Preparer Tax Identification Numbers should be used as authorizing numbers for clients' returns and add information about the benefits of e-filing to Notice 2010-85 and Form 8948.

Responding to the audit, IRS agreed with GAO recommendations and noted that if using PTINs as authorizing numbers is practical and cost effective, it could not be changed until the end of 2013 because it would require "significant programming changes."

For more:
- see the report, GAO-11-344 (.pdf)

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