Tax day has come and gone, but the Treasury Inspector General for Tax Administration says it has concerns about the Internal Revenue Service's Modernized e-File system.

In an audit dated March 31, TIGTA says a planned IRS transition from a legacy online system for filing individual tax returns to MeF is marred by low volumes and erroneous rejections of returns. The IRS has required many companies and nonprofits to use MeF to file taxes since 2005, but MeF began accepting 1040 forms from individuals only in February. The tax agency's goal is to replace its legacy e-file system with MeF by the end of 2013.

MeF is meant to pinpoint tax return errors and make acknowledgement of the received return nearly instantaneous. But, 24 percent of individual returns filed through MeF as of March 5 were rejected by the system, in many cases wrongly or without the explanation MeF is meant to provide, TIGTA auditors find. MeF uses a business rules engine with 434 rules to evaluate returns, but when TIGTA examined 30 of them, they found 19 rules rejected tax returns wrongly or without explanation.   

The rules in question had to do with various tax credits and the validity of social security numbers, the audit states.

Also, 1040 MeF filing volumes as of early March were low--just 98,596 returns, according to TIGTA. The IRS had planned for MeF to process 1.5 million individual returns by the end of February.

The audit also noted a 9.7 percent decline in the public's use of Free File, the free online tax preparation and e-filing program for eligible taxpayers developed through a partnership between the IRS and the Free File Alliance, a consortium of tax preparation companies.

For More:
- read the TIGTA audit (.pdf)
- check out the latest IRS filing statistics
- consider the Oliver Wendell Holmes quote that "Taxes are what we pay for civilized society" and other thoughts on taxes

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