Hawai'i ranks at the bottom of states using electronic filing of Internal Revenue Service tax returns, though more people are starting to adopt electronic submissions.

The IRS yesterday released figures showing about 46 percent of individual income tax returns from Hawai'i were filed online in 2007. That compares with the national figure of almost 57 percent.

The IRS is encouraging taxpayers to make more use of electronic filing, either through their home computers or with their tax preparers.

The IRS has touted the filing option because returns typically have fewer errors and taxpayers can get refunds in as little as 10 days if they choose to have the money directly deposited into their banks.

The agency, which began accepting electronic returns in 1986, has set a goal of getting 80 percent of returns filed electronically.

The agency says the error rate for returns prepared using tax software and filed electronically typically is 1 percent versus the 20 percent for paper returns.

IRS spokeswoman Judy Monahan said the IRS doesn't know why Hawai'i lags other states in electronic filing but is encouraged by the increasing numbers from the state.

Last year, 293,034 Hawai'i returns out of the 641,300 total individual returns were filed electronically.

That compares with the 268,940 electronic filings of the 620,940 total a year earlier, or 43 percent.

One reason some people balk at electronic filing is the cost. Some tax preparers may charge for the service, while TurboTax, the most popular home tax software, allows people to submit IRS returns electronically for $18.

But the IRS has come up with a free software and electronic filing alternative.

Again this year it's promoting the program, Free File, as a way for taxpayers to have access to free preparation software and electronic filing.

The program, operated through a partnership between the IRS and the 19 companies in the Free File Alliance LLC, offers free tax-preparation software online. Once finished entering data, individuals can have their returns e-filed.

The Free File program is available to taxpapers with an adjusted gross income of $54,000 or less in 2007 and can be accessed through the www.IRS.gov Web site.

The IRS said about 70 percent, or 97 million taxpayers, qualify for the Free File program.

Last year the Free File service was used by 3.9 million taxpayers.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.