The IRS began its endeavor into the world of electronic services by partnering with industry and the tax professional community. That partnership has continued to today and has allowed the program to expand to provide new services and to increase return volumes, reaching more taxpayers than ever before.
The IRS e-file program for individual and business tax returns has come a long way since it’s debut in 1986 with the transmission of 25,000 refund-only individual income tax returns from five transmitters in three locations. These returns were transmitted to the Cincinnati Service Center via a modem.
In 1988 sixteen districts were added to the list of electronic filing areas and in 1989 a total of 48 districts were participating.
In 1990 balance due returns were accepted for processing for the first time.
In 1991 the Federal/State electronic filing program began, with South Carolina participating in the pilot. By 2003, 37 states and the District of Columbia offered Fed/State e-file.
Each year since, the e-file system was been expanded to allow more tax returns to be e-filed. By 1994, approximately 98 percent of all individual tax returns could have been filed electronically. The IRS continues to work toward enabling 100 percent of all forms and schedules to be e-filed. In 1994 over 14 million individual and 1.7 million business returns were filed electronically from over 39,000 transmitters – 15.7 million electronic returns in all.
In 1999 the electronic payment program was expanded and an electronic funds withdrawal (direct debit) payment option was included in tax software, which allowed individual taxpayers to electronically file balance due returns and pay at the same time. The credit card payment option was also introduced which allowed individual taxpayers to either e-file balance due returns and pay by credit card at the same time or pay separately by phone or Internet.
As of December 31, 2009, 90.6 million tax returns, about 60 percent of all tax returns, were filed electronically. 59.4 million returns were e-filed by tax professionals.