The Internal Revenue Service should continue efforts to boost the electronic filing of tax returns by employers, but should first focus on achieving more e-filing of individual returns, the Electronic Tax Administration Advisory Committee said.

The ETAAC 2010 annual report to Congress said that electronic filing continues to grow across all major types of tax returns, and that marginal increases are expected in electronically filed Forms 941 and 940.

The overall e-file rate for major types of tax returns is projected to reach 59 percent for the 2010 filing season, the report said. To achieve an 80 percent electronic filing goal for these returns, 40 million more returns need to be filed electronically.

"We continue to believe the biggest opportunity to increase electronic filing over the next two years remains in the area of individual income tax returns," the report said.

IRS continued to make steady progress advancing individual return electronic filing, which increased to 72 percent in 2010 from 69 percent in 2009, the report said.

To increase electronic filing of Form 941, Employer's Quarterly Federal Tax Return, the committee had previously recommended using a free Internet-based application for employers. "The current ETAAC would like to study this area next year to better understand employment tax filer behavior and needs, and available tools," the report said. A copy of the report is available at the IRS website.

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