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Trend : As OLF usage
grows, ERO per-site volume drops.
It only stands to reason that as more taxpayers file their own returns over the
web, there will be fewer tax clients available for practitioners to serve. Adding
to the downward trend for practitioners: IRS adds anywhere from 6,000 to 20,000 new EROs
each year, thereby creating more sites to chase after a gradually shrinking pool.
Trend:
As OLF usage grows, taxpayer fraud increases.
Below are the number of individuals who have been prosecuted by IRS for filing fraudulent
legal-source returns, questionable refund returns, and frivolous returns. The vast
majority of these individuals, some of whom are unscrupulous return preparers, filed
multiple fraudulent returns electronically prior to being apprehended. A growing
percentage of these individuals use identity theft schemes to commit their
crimes. TY05 and Dollar Volume figures are not available as of this writing, although
Richard Speier, acting chief of the IRS Criminal Investigation division, commented
recently that the agency "is facing a sharp increase in refund fraud - up 322 percent
in the last six years."
Trend: As OLF usage grows, tax return errors & omissions increase.
As might be expected, the number of math error notices IRS sends to taxpayers has
actually declined over the years as more returns are prepared on computer. However,
the number of underreported income notices IRS sends to taxpayers, as represented
in the graph below, has increased dramatically along with do-it-yourself online
filing. The 2.8 million unreported income notices mailed to taxpayers in TY04 resulted
in a total of $4 billion in additional tax assessed. TY05 figures are not available
as of this writing.
Trend: OLF reject
rates are substantially higher than ERO reject rates.
As expected, tax professionals have a much lower e-file rejection rate compared
to online filers, likely due to the more sophisticated tax software professionals
use, as well as their familiarity with the data entry requirements of efile. Interestingly,
if you take away the Big Three online filing companies (TurboTax, TaxCut, TaxAct
handle 86% of OLF volume), most of the remaining online filing companies have very
high reject rates of 25-50%.
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© 2010 800-TAX REFUND, Inc.
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