IRS Free e-File Use Drops: Are Taxpayers Looking a Gift Horse in the Mouth?

The Taxpayer Inspector General announced that use of the free e-filing system made available by IRS dropped from over 5 million users for 2005 tax year to slightly under 4 million in the 2006 tax year. At part of the decrease can be explained by a tightening of an income limitation to $50,000 according to Inspector General J. Russell George. George also expressed concerns that the program needs to be marketed better and more reliably accurate. The drop in use of the program threatens a Congressional goal of 80% e-filed returns by the end of 2007.

IG George probably is on target with his critique of e-filing marketing and concerns about limiting the free filing opportunity; in all likelihood, fear of technology is also limiting use of e-filing. I believe that some people believe that use of e-filing increases their risk of audit; that perception alone, even if incorrect, would put a damper on e-filing.