Modernized e-File Update

2011 NESTOA Meeting

September 2011

presented by

Rob Bedoya

Director e-Channel SupportElectronic Tax Administration

IRS

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AGENDA

• 2011 Filing Season Recap

• MeF Background

• Taxpayer Benefits

• MeF Numbers

• MeF System Performance

• MeF Deployment Schedule and Retirement of Legacy e-File

• State and Industry Adoption

• Filing Season e-File Shutdown and Start Up

• Help and Support

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2011 Filing Season Recap

• IRS e-File hit a major milestone this year with over 100 million Individual Returns processed electronically. Through September 9, 2011, 108.8 million returns have been accepted, which is 12.9% higher than 2010. The current acceptance rate is 87.3 %, approximately two percent higher than 2010. The cumulative ERS fallout rate is 4.3%

• Individual Paper Returns received through September 9, 2011 is 30.0 million, with a cumulative ERS fallout rate of 34.3%.

• Over 43 million Business Returns were received during this period. Electronic filed receipts are 18% higher than last year. Paper Returns are 8.5% lower than last year. This trend is driven by extensions, corporation, and employment returns.

• This year Business Paper Returns dropped from 71% to 66% of total volume, while e-File receipts increased to 34% from 29% of total volume.

• The total number of Electronic Payments has increased 22.2% compared to last year.

• Clearly significant progress has been made to achieving our e-File goals. The success of the e-File program is directly attributed to the partnership that exists between Industry, States, and the IRS; and, our collective investments in technology to safely and securely transmit and process tax returns.

• What is the technology future of IRS e-File? Answer: MeF.

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MeF Background

• MeF is a web-based system that allows electronic filing of corporate, partnership, exempt organization, excise tax returns, and Individual 1040 returns through the Internet.

• MeF is a proven platform. Millions of returns have successfully been submitted, acknowledged, and processed through the system since 2004.

Forms Supported on MeF and Year Deployed

Corporations 1120, 1120S (2004) 1120-F (2008)

ExemptOrganizations

990, 990EZ, 990PF, 1120POL (2004) 990-N (e-postcard) (2008) 990 Redesign (2009)

Partnerships 1065, 1065-B (2007)

Excise Tax 2290 (2007) 720, 8849 (2008)

Extensions 7004 (2005) 8868 (2004)

Individual 1040 (phased over 3 years) (2010) (2011) (2012)

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Taxpayer Benefits

• MeF uses the widely accepted Extensible Markup Language (XML) format for identifying, storing and transmitting data. XML provides improved data accuracy and protection of Taxpayer information.

• MeF provides expanded error code explanations that pinpoint the location of the error in the return and provides more information to correct the Taxpayer’s return.

• MeF is a transactional based system that processes returns as they are received. Transmitters receive acknowledgements within minutes during non-peaks days (within 2 hours during peak days), instead of 24-48 hours under the legacy system. The Transmitter then sends the accepted or rejected acknowledgement on to the Preparers and Taxpayers.

• MeF provides expanded availability of electronic filing. Taxpayers have the option to e-file beyond the traditional October 15 legacy e-file shutdown date.

• Owe Taxes? – With MeF Taxpayers can e-file a balance due return and, at the same time, authorize an electronic funds withdrawal from their bank account.

• MeF provides a single point of submission and retrieval of State returns. Taxpayer’s State returns are made available to State taxing agencies in the same XML data format ensuring the same accuracy and protection of State return information.

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MeF Numbers

• Through July 15th, over 21.1 million federal and state submissions were transmitted through the MeF platform since January 12, 2011.

• Over 16.6 million BMF and IMF returns/extensions were accepted for processing which reflects a 121% increase over last year's total of 7.5 million. BMF MeF accepted 6.7 million returns which represent a 33% voluntary growth rate from last year. Over 47% of all 1120, 1065, 990 and 2290 returns are now e-filed. BMF also experienced a 1.22% reduction in reject rates down from 6.93% to 5.71%.

• MeF accepted over 9.9 million Individual (IMF) tax returns/extensions - an increase over last year's count of 974,000 accepted returns. IMF also had a 3.6% reduction in reject rates from 16.58% to 12.98%. The rate falls is in line with the 1040 Legacy program.

• There were over 2.6 million submissions made available for state processing. This is significant because it reflects a 160% increase over the 1 million made available last year with over 693,000 attributable to the 1040 program

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MeF System Performance

• During Filing Season 2011 the MeF system performed very well with minimal unscheduled production downtime. We did experience an Oracle issue which resulted in MeF being unavailable for 13 hours on March 16th.

• Overall acknowledgement retrieval time was less than 5 minutes during non-peak periods.

• Only processing delay was due to the IMF and BMF Extender legislation. The 1040 Schedule A went into production on Sunday, Feb. 13th and the list of BMF forms went into production on March 6th.

• For Filing Season 2012, the IRS is continuing to implement a number of performance improvements in preparation for increased Industry and State participation, and increase return volume.

• IRS has no plans to impose any kind of volume controls on Transmitters or States who send returns to MeF during Filing Season 2012.   IRS made significant changes to its infrastructure and applications prior to Filing Season 2011 resulting in little unscheduled downtime and greatly improved system performance. IRS is continuing to execute its performance improvement plan in preparation for Filing Season 2012 with the objective of maintaining its performance goals of making acknowledgements available within 5 minutes during non peak days/hours and within 2 hours during peak days/hours.

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MeF Deployment Schedule and Retirement of Legacy e-File

• IRS will deploy the last phase of the 1040 Modernized e-File (MeF) program for Filing Season 2012. MeF Release 7 will enable electronic filing of all 1040 forms and schedules. In preparation for increased Industry and State participation, the IRS expanded the MeF disaster recovery capabilities and implemented a number of improvements to increase system stability and performance. Filing Season 2012 is the last year that Legacy 1040 e-File and 1040 MeF will operate in parallel.   Industry and States should be aware that the IRS is on schedule to permanently shutdown (retire) the Legacy 1040 e-File system in October 2012.  The IRS is committed to working with Industry and States as they develop and execute their plans to migrate to the MeF platform.

• The 94x form family will be deployed on MeF for Filing Season 2013 and the 1041 form family for Filing Season 2014. Once 94x and 1041 are deployed on MeF and after a transition period, the Legacy systems for processing these forms will be retired (actual date TBD).

• Individual Amended Return (1040x) processing is targeted for Filing Season 2015 deployment.

• Sequencing and planning for future MeF releases beyond Filing Season 2015 will be completed during fiscal year 2012.

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State and Industry Adoption

• Currently 27 States are 1040 MeF production ready: (AL, AR, CO, CT, GA, ID, IL, IN, KS, LA, ME, MD, MI, MO, MT, NE, ND, OH, OK, OR, PA, RI, SC, UT, VA, WI, WV). IRS is actively working with Federation of Tax Administrators (FTA) Tax Information Group For EC Requirements Standardization (TIGERS) to support the remaining the States (who have individual income tax) needing to migrate over to MeF. According to FTA TIGERS all States have committed to be production ready at sometime during Filing Season 2012, with the exception of DC which we are working through FTA TIGERS to assist them.

• MeF 1040 activity results as of July 15th confirm 19 software companies are in production and 3 others have passed ATS but are not yet in production. A total of 26 companies participated in the ATS process with 35 of 42 software packages having passed into production status.

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Filing Season e-FileShutdown and Start Up

IMF Shutdown Dates• 1040 e-File (Legacy) Program

The last date to transmit returns on extension from Form 4868 is October 17, 2011.

The last date to retransmit rejected returns on extension from Form 4868, or e-File late tax returns is October 20, 2011.

• 1040 MeF Program (limited to Form 1040 and the 21 commonly-filed forms and schedules)

If the software company supports it, the last day to retransmit rejected returns or transmit late returns is 11:59 AM, Eastern on November 22, 2011.

• BMF e-File (Legacy) 94x and 1040 Program 94x cutover period is scheduled from December 14, 2011 to January 2, 2012 1041 Shutdown Up is the same as 1040 Legacy

Filing Season 2012 Start Up Dates• 1040 e-File Program

HUB is from January 10 to 13, 2012 Production Startup is tentatively scheduled for January 17, 2012.

• BMF Program• 94x start up is scheduled for January 2, 2012• 1041 is tentatively scheduled for January 17, 2012

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Help and Support

• MeF 1040 web pages on irs.gov– For all things MeF

• MeF Mailbox– Email Address: mefmailbox@irs.gov– Questions on schemas or other technical issues concerning the program– Key questions/answers will be posted to irs.gov as Frequently Asked

Questions (FAQs)

• MeF Status Page at http://www.irs.gov/efile/article/0,,id=168537,00.html

• Calendar of Events is posted at http://www.irs.gov/efile/article/0,,id=206086,00.html

– 1040 Executive Council meetings (monthly)– 1040 Working Group conference calls (monthly)– Schema walk-through conference calls (as needed)

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Backup Slides

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MeF R6.1 and 6.2 1040 Supported Forms and Schedules

Sch A Sch E Sch SE 2441 8812 8888

Sch B Sch EIC 1099-R 4562 8829 W-2

Sch C Sch M 2106 4868 8863

Sch D Sch R 2210 8283 8880