Every spring, thousands of Americans spend hours filing dreaded tax forms, a traditionally complex and time-consuming process. For years, taxpayers were responsible for locating the appropriate forms, deciphering the instructions, completing the documents in their entirety, and then submitting the forms by mail. The overwhelming paperwork posed an even bigger headache for the Internal Revenue Service (IRS), which was responsible for processing over 113 million tax forms from individual filers each year. In order to process the massive amounts of paper and information the IRS receives, the IRS had to hire extra employees during the spring filing season. Some estimates indicate that approximately 90 percent of IRS labor costs are associated with managing the excessive paper work. By the early 1990s, Americans had become increasingly accustomed to automated telephone systems due to their prevalent use in the private sector. The IRS decided to adapt these better business practices to the public sector to satisfy taxpayers' expectations for convenience and speed and to minimize the IRS's processing costs.
In 1992, the IRS improved the out-of-date mail-in method of tax filing by introducing TeleFile as a pilot program in Ohio; the program expanded nationally in 1996. TeleFile allows taxpayers to file their tax returns with one free, fast, and easy telephone call. The automated system prompts the taxpayer for all the necessary information to complete the return. Once all the data have been entered, the system automatically computes the tax due, calculates the refund or balance due, and provides this information to the caller. The caller is then able to either accept the information by signing the return or reject the information by simply hanging up the phone. To sign the return, the taxpayer enters a unique five-digit code that is provided by the IRS. TeleFile also provides a confirmation number to the taxpayer so that they retain proof of filing. A TeleFile Tax Record, located in the instruction booklet, is available for their personal files.
Receiving tax return information over the telephone rather than on paper reduces tax return processing costs and errors, making for a more efficient and effective IRS. Taxpayers can make the toll-free call 24 hours a day seven days a week and the entire transaction can be completed in an average of 9.5 minutes. The refunds arrive in as few as seven days and no more than three weeks. The most challenging aspect of the implementation was to effectively convince taxpayers to trust TeleFile. Through targeted educational and marketing campaigns, the participation rate increased from 12.4 percent in 1996 to 17 percent of eligible filers in 1997.
Of the 26 million Americans who received the TeleFile forms in 1997, over 4.7 million utilized the system, and 99 percent of these users said that they would employ it again. Customer service surveys and focus groups have revealed that 88 percent of users considered TeleFile faster than filing a paper return. Analysis also indicated that when using TeleFile, taxpayers spend an average of 125 minutes less to complete all the tasks related to filing a tax return. TeleFile has also proven to be significantly more accurate than traditional filing methods. The error rate of TeleFile is only .0002 percent, compared to 6.6 percent for mailed-in forms. As of 1997, more than eleven states had implemented a local version of the TeleFile system, and the IRS had received inquiries regarding replication from countries around the world.