The Internal Revenue Service (IRS) has improved its electronic tax filing system but continues to slog through paper filings, the Government Accountability Office (GAO) found in a new report in which it told the tax agency that it needs to remove barriers for business owners to e-file their tax returns.
Citing its ability to generate “significant” resource savings, e-filing efficiency received a gold star from GAO. The watchdog said that during the 2024 tax filing season, the IRS received nearly a million fewer returns filed on paper than in the 2023 season – and about 10 million fewer paper returns compared to the 2019 filing season.
But not all IRS tax forms can be filed electronically, including many forms that businesses file with the agency in paper form.
Only around 81 percent of business taxpayers use e-file compared to 96 percent of individual taxpayers who used e-filing in the 2024 tax season, according to GAO.
In its Jan. 30 report, the GAO said that business taxpayers face various barriers when e-filing, including the lack of a real-time online signature personal identification number, which an IRS assessment found was the greatest challenge businesses encountered.
While the IRS made 20 more tax forms available to file electronically in 2024 and with more to come in the 2025 filing season, an automated real-time online signature number project to address the major barrier has been under a pending status since November 2024, according to GAO.
“Addressing barriers to e-filing business returns could help IRS reduce the volume of more costly paper-based work and improve services to business filers,” said GAO. “We will continue to monitor IRS’s progress on these efforts.”
According to the agency, paper-filed returns may need to be handled by multiple employees during processing, and a paper-filed Form 1040 cost the agency $8.65 to process in 2023 – compared to e-filed returns which cost $0.23.
Forms not yet available for e-filing include those used by estates and forms used to report certain types of gifts above a given dollar amount.
