Sunday, March 13, 2016

In Pennsylvania, Electronic Filing Makes a Comeback

When I reported my income taxes this year, I found I was able to file online in my state for the first time in years. The Pennsylvania Department of Revenue had been phasing out its online filing options for individual taxpayers, hoping to steer taxpayers toward private tax preparation services that would provide online filing for a fee, generally around $20 to $30. It seems safe to say that this experiment in using government operations as a profit opportunity was a failure and the department was swamped with more filings on paper than it was prepared for. This year brings a dramatic reversal — electronic filing is back and the qualifications for it have been expanded so that most taxpayers now qualify. Previously, for example, freelancers might qualify to file online, but owners of businesses that required equipment were forced to file on paper. Under the new rules, an owner of one business of almost any description qualifies to file online (though the owner of multiple businesses must still file on paper).

Online filing might be seen as a convenience for taxpayers, but it is mainly a way for the government to save money. When Pennsylvania decided to restrict online filing, it was like a retailer that told its customers that they could no longer conduct transactions on the web site. This wouldn’t make any sense in retail because it costs a business almost nothing to receive an order online, but it costs several dollars to process an order received in person or through the mail. The same is true for agencies that collect taxes. With Pennsylvania having trouble writing a budget as it is, it would have been hard for the state to spend the extra $50 million to process tax reports that didn’t really have to be on paper.