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The Honolulu Advertiser
Posted on: Friday, April 7, 2006

Hawai'i low in tax e-filings

By Greg Wiles
Advertiser Staff Writer


The IRS estimates that 203,219 Hawai'i taxpayers didn't file electronically, even though they used home-computer software or a preparer with capability to e-file.

Overall, there were 604,667 Hawai'i personal income tax returns filed, of which 246,941 were done so electronically.

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Hawai'i's taxpayers are stragglers when it comes to filing their federal tax returns electronically, though more are starting to adopt the practice, according to the Internal Revenue Services, which is pushing use of the technology.

Hawai'i has one of the lowest levels of electronic filing nationwide, said Bert DuMars, IRS director of electronic tax administration. Forty-one percent of the state's income tax returns were filed through electronic networks compared with 51 percent nationwide.

The IRS is trying to boost electronic filing, promoting it as a way to get returns and refunds processed more quickly compared to those that are mailed. The cost to process electronic returns is less than half of the $1.60 it costs the IRS for mailed-in returns because of the extra labor required, DuMars said.

Taxpayers can receive a refund deposited directly into their bank account within 10 days. That compares to the six to eight weeks it takes to receive a check when sending a return via the U.S. Postal Service.

"The reason it is so popular is that it's very fast. It's easy," said DuMars on a conference call yesterday with reporters.

In addition, the number of errors on returns prepared with software and filed electronically is lower (1 percent versus 20 percent) than with mailed-in returns, which are subject to taxpayer and data-entry personnel mistakes.

More Hawai'i taxpayers are starting to use e-filing, either from their home computer or through tax preparers. IRS statistics show e-filings from Hawai'i rose 6.1 percent through March compared to the same period last year. Nationally, e-filings are growing by 3.3 percent.

"It makes it easier," said Henry Akau, a Hawai'i Kai resident who sends in returns electronically through his tax preparer. Among the attractive features for him is not having to deal with the paperwork.

While the IRS contends there is little reason not to file electronically, there are those who balk at it. There may be a variety of reasons for this, including people who dislike sending information over the Internet and those who see no advantage in faster processing because they owe taxes, DuMars said.

Others dislike having to pay fees that some software programs charge users for electronic filing. TurboTax, the most popular home software, requires $15 each to transmit federal and state returns electronically.

Nina E. Olson, the taxpayer advocate for the federal government, told Congress on Monday she used a $20 commercial program to prepare her own taxes, but didn't e-file because of the extra charge.

"I resented the notion that I would have to pay separate fees to prepare my return and to file it, so I printed out my return and mailed it in," Olson said in prepared testimony.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.