Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

History of E-File

Did you file your tax return electronically this year? If so, you are in with a pack of your closest friends – over 100 million tax returns are expected to have been completed by e-file for 2015. That is a large number – but it looks bigger when it is written out as 100,000,000.

But if you were with the very first group of electronically filed returns for 1986 – there were only 25,000 that year.

The 1986 program was a pilot program to try and gauge acceptance on both the part of preparers and taxpayers. A whopping five preparers participated, in three metropolitan areas – Cincinnati, Raleigh-Durham and Phoenix (Henry & Horne was not the firm in Phoenix!).

Only returns that were due refunds could be electronically filed. The tax preparer would call the IRS in Cincinnati and the IRS employee would plug the phone line into what amounted to a big modem with some sort of a tape drive. The tape would then be moved to a different system, where the IRS computer would massage the data on the tape drive into a format that could be read by the IRS computers.

That is not the way it works now – we electronically file through our tax software provider. For federal transmittals, even at the end with the big crush, we are getting acknowledgement back within 24 hours – sometimes sooner. Many of the states, including Arizona, are taking a bit longer – 48 hours.

And the computers just talk – I believe – there is no transferring of data from one computer system to another computer system.

By Donna H. Laubscher, CPA