FY 06 NATIONWIDE ANALYSIS

Electronic Tax Administration Business Master File Marketing Database SB/SE Research
March 2006
Publication 4425 (3/2006) Catalog No: 39407D

Project: ID BKN0045

Forward
The Annual BMF Nationwide Analysis is similar to a State of the Union presentation for Electronic Tax Administration (ETA). It tells those involved in the ETA effort for business returns what has been accomplished and what still needs to be done. The format of the Nationwide Analysis Research Report is different from most research reports. The entire product encompasses a collection of PowerPoint presentations along with a standard format Executive Overview. We include a separate standalone presentation (report) for each form series that we have researched. This format provides the customer with ready made presentations which can be offered to groups within the IRS or externally to tax practitioners. This presentation provides a project summary with highlights from the other reports. The next three slides present contact information, data sources, and forms included in our research project. The remaining slides contain the project highlights.

2

Primary Data Sources
• All business tax returns filed for Processing Year 2005 • Returns processed through December 31, 2005 (cycle 200552) • The BMF ETA Marketing Database contains variables from the TRDB (Tax Return Data Base) and TeleFile databases as well as the BRTF (Business Returns Transaction File) • Includes over 30 million entities
3

Forms Studied
• Form 940—Employer's Annual Federal Unemployment Tax Return • Form 941—Employer's Quarterly Federal Tax Return • Form 990—Exempt Organization Income Tax Return • Form 1041—Fiduciary Income Tax Return • Form 1065—Return of Partnership Income • Form 1120—Corporation Income Tax Return • Form 1120S—Small Business Corporation Income Tax Return
4

Form 1120S Filers
Small Business Corporation Income Tax Return Processing Year 2005

5

Form 1120S Annual Filing Volume
Processing Years 2003-2005
4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2003
Source: 2005 ETA Marketing Database

3,691,272 3,318,026 3,474,943

2004

2005
6

Annual Filing Volume for e-file Form 1120S
200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 186,752
Processing Year (2003-2006)

153,874

38,659 0 2003 2004 2005 2006*
7

*As of 3/26/06
Source: 2005 ETA Marketing Database

Forms 941 Volume – 3rd Quarter
Electronic 0%

Total: 5,692,928
Paper 81%

XML 19%

On-Line 0%

XML* (1,100,665)

Electronic (7,186)

Paper (4,583,275)

On-Line (1,802)

* XML - modernized e-file/ prepared by either a preparer or taxpayer Electronic - traditional e-file/preparer prepared Online - traditional e-file/taxpayer prepared

Third Quarter 2005
Source: 2005 ETA Marketing Database

8

Form 1120S Taxpayers Impacted by Mandating e-filing for Asset Thresholds
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Total Assets >50 Million
2006 Year

32,005

5,134

Total Assets >10 Million
9

2007 Year

The electronic filing requirements only apply to entities that file at least 250 returns, including income tax, excise tax, information and employment tax returns, during a calendar year. Source: 2005 ETA Marketing Database

IRS Mandated Returns
• The IRS has mandated that any Form 1065 with over 100 partners must be submitted electronically; only 7% of 1065 returns (180K) were e-filed in PY 2005. • IRS is has mandated corporations with total assets of $50 million or more must file their Forms 1120 and 1120S electronically. • If the Service mandated that all prepares who file over 100 business returns transmit them electronically to the IRS, we estimate the following e-file volume based on PY 2004 filings:
Form 1065: 687,000 returns (27% of all Partnerships) Form 1120: 365,000 returns (16% of all Corporations) Form 1120S: 990,000 returns (28% of all S-Corps)
10

Form 1120S Taxpayers Enrolled in EFTPS (Electronic Federal Tax Payment System)
Processing Year 2005

Enrolled 33% Not Enrolled 67%

Enrolled (1,228,423)
Source: 2005 ETA Marketing Database

Not Enrolled (2,462,849)
11

Total Number of 1120 Series Taxpayers Making Payments
Paper & Electronic 6% Paper Only 73% Electronic Only 21%

Paper Only (493,281) Paper & Electronic (43,013)
Source: 2005 ETA Marketing Database

Electronic Only (146,288)
12

e-file Migration Between Filing Options
No Returns 7% e-file 73%

e-file 100%

38,659

Paper 20%

2004
Paper e-file

2005
No Returns

73% of Form 1120S e-file Users Remained Loyal13
Source: 2005 ETA Marketing Database

Forms 941: Telefile Migration to New Filing Options
XML 1% No Returns 11% Electronically 0% On-Line 0% XML 1,147 Electronically 845 Paper 161,515 No Returns 20,491 On-Line 786 Paper 88%

1.5% of Telefile Users Migrated to e-file
Source: 2005 ETA Marketing Database

14

Form 1120S: Implementation Schedule
Started 2/23/2004

Modernized e-file Continues

Paper Continues

Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec2003 2004 2004 2004 2004 2005 2005 2005 2005
15

Form 1120S Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1% 4%

80%

Actual
28% 21% 14% 8%

33%

37%

39%

2004 2005 2006 2007 2008 2009 2010 2011 2012
Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

16

Form 940 Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012
17

80%

Actual
24%

16%

17%

18%

19%

20%

22%

23%

Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

Form 1120S Preparer/No Preparer
Total: 3,691,272

Preparer (3,415,098) 93%

No Preparer (276,174) 7%

Source: 2005 ETA Marketing Database

Processing Year 2005

18

Recommended Target Market for Form 1120S Electronic Filing
8,078 EROs* filing more than 50 e-file 1040 & more than 50 1120S returns filed 979,278 S Corporation returns *Electronic Return Originators
19
Source: 2004 ETA Preparer Database

Form 1120S: Monthly Filing Patterns
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2003
Source: 2005 ETA Marketing Database

Peak volume was 1,295,921 in March 2005.

September 2005 volume was 448,383.

2004

2005
20

e-file Form 1120S Monthly Filing Patterns
60,000 50,000 40,000 30,000 20,000 10,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004
Source: 2005 ETA Marketing Database

Peak volume was 55,770 in March 2005.

September 2005 volume was 17,929.

2005

21

Filing Patterns for e-file Form 940 by Cycle Posted
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 2003
Source: 2005 ETA Marketing Database

Peak volume was 403,220 in cycle 7 of 2005.

2004

2005

22

Filing Patterns Form 940 by Cycle Posted
1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 3 6

Peak volume was 846,198 in cycle 7 of 2005.

9 12 15 18 21 24 27 30 33 36 39 42 45 48 51
2003 2004 2005
23

Source: 2005 ETA Marketing Database

Form 1120S Fiscal Year Returns vs. Calendar Year Returns
Total: 3,691,272

Fiscal Year 74,153 (2%)

Calendar Year 3,617,119 (98%)

Processing Year 2005
Source: 2005 ETA Marketing Database

24

Form 1120S Initial Corporation Filings
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2003
Source: 2005 ETA Marketing Database

329,829

371,951

409,791

2004

2005
25

Processing Years 2003-2005

Forms 1120S by Industry
(The North American Industry Classification System - NAICS)
CODE NAICS TITLE COUNT
123,072 114,103 90,708 88,208 84,633 76,860 76,856 68,039 66,326 65,272

%
3% 3% 2% 2% 2% 2% 2% 2% 2% 2%
26

541990 All Other Professional, Scientific, & Technical Services 531390 Other Activities Related to Real Estate 236110 Residential Building Construction 238900 Other Specialty Trade Contractors 531120 Lessors of Nonresidential Buildings 722110 Full-Service Restaurants 812990 All Other Personal Services 531210 Offices of Real Estate Agents & Brokers 621111 Offices of Physicians 541600 Management, Scientific, & Technical Consulting

Three of the top 10 NAICS codes involve real estate returns.
Source: 2005 ETA Marketing Database

Forms 1120S by Business Operating Division
Total: 3,691,272

LMSB 32,282 (1%)

SBSE 3,658,770 (99%)

TEGE 220 (0%)

27
Source: 2005 ETA Marketing Database

Processing Year 2005

Forms 1120S by Assets & Method
Paper Under $200,000 $200,000 to under $10 Million $10 Million or More Total 2,675,971 830,406 31,021 3,537,398 e-file 111,204 41,686 984 153,874 Total 2,787,175 872,092 32,005 3,691,272

Processing Year 2005
Source: 2005 ETA Marketing Database

28

Forms 1120 by Assets & Method
Paper Under $250,000 $250,000 Under $1 Million $1 Million Under $5 Million $5 Million Under $10 Million $10 Million Under $50 Million $50 Million or More Total 1,561,157 363,689 169,535 27,544 26,601 17,610 2,166,136 e-file 38,582 12,207 5,379 574 196 21 56,959 Total 1,599,739 375,896 174,914 28,118 26,797 17,631 2,223,095
29

Processing Year 2005
Source: 2005 ETA Marketing Database

Form 1120S by State

Source: 2005 ETA Marketing Database
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

6,598 42,466 34,135 62,914 274,354 93,430 26,020 13,357 493,728 137,007

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

11,211 31,661 20,962 186,203 85,931 28,464 47,665 44,752 79,929 67,339

20,372 New Jersey (NJ) Maine (ME) 117,304 New Mexico (NM) Michigan (MI) Minnesota (MN) 83,144 Nevada (NV) Missouri (MO) 57,930 New York (NY) Mississippi (MS) 22,816 Ohio (OH) Montana (MT) 18,078 Oklahoma ( OK) 107,353 Oregon (OR) North Carolina (NC) 7,505 Pennsylvania (PA) North Dakota (ND) Nebraska (NE) 24,756 Rhode Island (RI) New Hampshire (NH) 11,972 South Carolina (SC)

128,847 17,242 32,026 333,546 113,298 42,055 46,305 135,923 17,517 49,200

South Dakota (SD) 10,781 30,512 Tennessee (TN) Texas (TX) 186,752 Utah (UT) 40,031 Virginia (VA) 87,697 Vermont (VT) 10,665 74,240 Washington (WA) 30 50,327 Wisconsin (WI) West Virginia (WV) 10,551 Wyoming (WY) 9,079

e-file Penetration by State

Source: 2005 ETA Marketing Database
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

8% 4% 5% 3% 1% 4% 2% 5% 4% 3%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

2% 4% 3% 3% 3% 6% 2% 2% 16% 2%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

2% 26% 5% 5% 4% 6% 3% 9% 7% 4%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

2% 5% 6% 1% 4% 3% 3% 3% 5% 5%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

10% 3% 3% 4% 3% 5% 4% 31 6% 2% 9%

Recommendations
• Market BMF e-file to IMF Electronic Return Originators; active ERO’s file over a million 1065’s and almost 3 million 1120’s on paper. • Market BMF e-file to preparers rather than taxpayers; 86% of 1065 filers and 93% of 1120 filers use a preparer. • Coordinate BMF e-file marketing efforts with EFTPS; there are people paying electronically who could also be filing electronically. • Coordinate BMF e-file marketing efforts with states mandating electronic filing of Individual & Business returns; this segment represents the largest increase in federal e-file across the board. • Additional IRS mandates should be preparer-based rather than based on the size or asset class of a business.
32

Form 1120 Filers
Corporation Income Tax Return Processing Year 2005

Form 1120 Annual Filing Volume
Processing Years 2003-2005
2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2003
Source: 2005 ETA Marketing Database

2,343,845

2,280,791

2,223,095

2004

2005
34

Annual Filing Volume for e-file Form 1120
60,000 50,000 40,000 30,000 20,000 10,000 0 0 2003
Source: 2005 ETA Marketing Database

56,959
Processing Year (2003-2005)

14,581

2004

2005
35

In Processing Year 2005, only 3% of all Forms 1120 were filed electronically.
36

Source: 2005 ETA Marketing Database

Form 1120 Taxpayers Impacted by Mandating e-filing for Asset Thresholds
50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 44,425

17,631

2006 Year

2007 Year

Total Assets >50 Million

Total Assets >10 Million
37

The electronic filing requirements only apply to entities that file at least 250 returns, including income tax, excise tax, information and employment tax returns, during a calendar year.

Form 1120 by Series
Processing Years 2003-2005
2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

2,118,978

2,066,422

2,012,420

224,867
2003

214,369
2004

210,675
2005

Form 1120A
Source: 2005 ETA Marketing Database

Form 1120
38

Form 1120 Taxpayers Enrolled in EFTPS (Electronic Federal Tax Payment System)
Processing Year 2005

Enrolled 38%

Not Enrolled 62%

Enrolled (851,814)
Source: 2005 ETA Marketing Database

Not Enrolled (1,371,281)
39

Total Number of 1120 Series Taxpayers Making Payments
Paper & Electronic 6%

Paper Only 73%

Electronic Only 21%

Paper Only (493,281) Paper & Electronic (43,013)
Source: 2005 ETA Marketing Database

Electronic Only (146,288)
40

e-file Migration Between Filing Options
No Returns 13%

e-file 100%

14,581

e-file 71%

Paper 16%

2004
Paper Electronic

2005
No Returns
41

71% of Form 1120 e-file Users Remained Loyal
Source: 2005 ETA Marketing Database

Form 1120: Implementation Schedule
Started 2/23/2004

Modernized e-file Continues

Paper Continues

Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec2003 2004 2004 2004 2004 2005 2005 2005 2005
42

Form 1120 Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1% 3% 6% 12%

80%

Actual
26% 18% 32% 36%

38%

2004 2005 2006 2007 2008 2009 2010 2011 2012
Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

43

Preparer/No Preparer
Total: 2,223,095

Preparer (1,939,564) 87%

No Preparer (283,531) 13%

Processing Year 2005
Source: 2005 ETA Marketing Database

44

Recommended Target Market for Form 1120Electronic Filing
3,725 EROs* filing more than 50 e-file 1040 & more than 50 1120 returns filed 433,254 Corporation returns *Electronic Return Originators
45
Source: 2004 ETA Preparer Database

Form 1120: Monthly Filing Patterns
700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2003
Source: 2005 ETA Marketing Database

Peak volume was 556,356 in March 2005. September 2005 volume was 360,817.

2004

2005
46

e-file Form 1120 Monthly Filing Patterns
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004
Source: 2005 ETA Marketing Database

Peak volume was 15,881 in March 2005. September 2005 volume was 10,364.

2005

47

Fiscal Year Returns vs. Calendar Year Returns
Total: 2,223,095

Fiscal Year 753,494 (34%)

Calendar Year 1,469,601 (66%)

48
Source: 2005 ETA Marketing Database

Processing Year 2005

Initial Corporation Filings
Processing Years 2003-2005
250,000

208,224
200,000 150,000 100,000 50,000 0 2003

201,661

200,295

2004

2005
49

Source: 2005 ETA Marketing Database

Forms 1120 by Industry
(The North American Industry Classification System - NAICS)
NAICS NAICS TITLE Count 92,350 70,693 60,087 44,681 38,620 37,336 33,815 32,926 32,010 31,826 % 4% 3% 3% 2% 2% 2% 2% 1% 1% 1%
50

531390 Other Activities Related to Real Estate 621111 Offices of Physicians (except mental health specialists) 541990 All Other Professional, Scientific, & Technical Services 238900 Other Specialty Trade Contractors 722110 Full-Service Restaurants 236110 Residential Building Construction 531120 Lessors of Nonresidential Buildings 531110 Lessors of Residential Buildings & Dwellings 531310 Real Estate Property Managers 812990 All Other Personal Services

Four of the top 10 NAICS codes involve real estate returns.
Source: 2005 ETA Marketing Database

Electronic Forms 1120 by Industry
(The North American Industry Classification System - NAICS)
CODE 621111 Offices of Physicians 541990 All Other Professional, Scientific, & Technical Services 238900 Other Specialty Trade Contractors 531390 Other Activities Related to Real Estate 621210 Offices of Dentists 236110 Residential Building Construction 541110 Offices of Lawyers 722110 Full-Service Restaurants 524210 Insurance Agencies and Brokerages 812990 All Other Personal Services NAICS TITLE Count 3,209 1,646 1,521 1,482 1,283 1,209 1,123 1,070 1,019 853 % 6% 3% 3% 3% 2% 2% 2% 2% 2% 1%
51

* The percentage of all electronic Forms 1120 filed in PY 2005
Source: 2005 ETA Marketing Database

Forms 1120 by Business Operating Division
Total: 2,223,095
LMSB 45,733 (2%) SBSE 2,170,310 (98%) TEGE 7,052 (0%)

52
Source: 2005 ETA Marketing Database

Processing Year 2005

Forms 1120 by Assets & Method
Paper Under $250,000 $250,000 Under $1 Million $1 Million Under $5 Million $5 Million Under $10 Million $10 Million Under $50 Million $50 Million or More Total 1,561,157 363,689 169,535 27,544 26,601 17,610 2,166,136 e-file 38,582 12,207 5,379 574 196 21 56,959 Total 1,599,739 375,896 174,914 28,118 26,797 17,631 2,223,095
53

Processing Year 2005
Source: 2005 ETA Marketing Database

Source: 2005 ETA Marketing Database

Form 1120 by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

3,579 20,688 17,075 34,964 301,655 34,260 26,104 9,055 171,685 57,566

14,018 Hawaii (HI) 23,792 Iowa (IA) 7,635 Idaho (ID) 99,146 Illinois (IL) 22,981 Indiana (IN) 20,165 Kansas (KS) 18,921 Kentucky (KY) 32,911 Louisiana (LA) Massachusetts (MA) 51,424 43,593 Maryland (MD)

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

8,375 75,356 30,813 38,674 14,726 9,086 53,948 4,508 14,141 11,162

92,376 South Dakota (SD) 4,946 New Jersey (NJ) 9,722 Tennessee (TN) 33,181 New Mexico (NM) 32,196 Texas (TX) 172,582 Nevada (NV) 219,590 Utah (UT) 14,794 New York (NY) 68,077 Virginia (VA) 51,007 Ohio (OH) 22,837 Vermont (VT) 4,915 Oklahoma ( OK) 23,823 Washington (WA) 38,156 Oregon (OR) 54 66,621 Wisconsin (WI) 37,749 Pennsylvania (PA) 7,381 West Virginia (WV) 9,850 Rhode Island (RI) 4,497 South Carolina (SC) 24,524 Wyoming (WY)

Source: 2005 ETA Marketing Database

e-file Penetration by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

4% 2% 3% 2% 1% 2% 1% 2% 1% 2%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

1% 2% 1% 1% 2% 5% 1% 1% 14% 1%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

1% 21% 3% 3% 2% 3% 2% 6% 5% 3%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

1% 4% 2% 0% 3% 2% 2% 2% 3% 3%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

6% 2% 2% 2% 1% 3% 2% 55 4% 1% 3%

Form 1120S Filers
Small Business Corporation Income Tax Return Processing Year 2005

Form 1120S Annual Filing Volume
Processing Years 2003-2005
4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2003
Source: 2005 ETA Marketing Database

3,691,272 3,318,026 3,474,943

2004

2005
57

Annual Filing Volume for e-file Form 1120S
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 153,874
Processing Year (2003-2005)

38,659 0 2003 2004 2005
58

Source: 2005 ETA Marketing Database

In Processing Year 2005, only 4% of all Forms 1120S were filed electronically.
59

Source: 2005 ETA Marketing Database

Mandating Impact on Form 1120S
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
2006 Year 2007 Year

32,005

5,134

Total Assets >50 Million

Total Assets >10 Million
60

The electronic filing requirements only apply to entities that file at least 250 returns, including income tax, excise tax, information and employment tax returns, during a calendar year.

Form 1120S Taxpayers Enrolled in EFTPS (Electronic Federal Tax Payment System)
Processing Year 2005

Enrolled 33% Not Enrolled 67%

Enrolled (1,228,423)
Source: 2005 ETA Marketing Database

Not Enrolled (2,462,849)
61

e-file Migration Between Filing Options
No Returns 7% e-file 73%

e-file 100%

38,659

Paper 20%

2004
Paper e-file

2005
No Returns

73% of Form 1120S e-file Users Remained Loyal62
Source: 2005 ETA Marketing Database

Form 1120S: Implementation Schedule
Started 2/23/2004

Modernized e-file Continues

Paper Continues

Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec2003 2004 2004 2004 2004 2005 2005 2005 2005
63

Form 1120S Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1% 4%

80%

Actual
28% 21% 14% 8%

33%

37%

39%

2004 2005 2006 2007 2008 2009 2010 2011 2012
Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

64

Preparer/No Preparer
Total: 3,691,272

Preparer (3,415,098) 93%

No Preparer (276,174) 7%

Source: 2005 ETA Marketing Database

Processing Year 2005

65

Recommended Target Market for Form 1120S Electronic Filing

8,078 EROs* filing more than 50 e-file 1040 & more than 50 1120S returns filed 979,278 S Corporation returns *Electronic Return Originators
66
Source: 2004 ETA Preparer Database

Form 1120S: Monthly Filing Patterns
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2003
Source: 2005 ETA Marketing Database

Peak volume was 1,295,921 in March 2005.

September 2005 volume was 448,383.

2004

2005
67

e-file Form 1120S Monthly Filing Patterns
60,000 50,000 40,000 30,000 20,000 10,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004
Source: 2005 ETA Marketing Database

Peak volume was 55,770 in March 2005.

September 2005 volume was 17,929.

2005

68

Fiscal Year Returns vs. Calendar Year Returns
Total: 3,691,272

Fiscal Year 74,153 (2%)

Calendar Year 3,617,119 (98%)

69
Source: 2005 ETA Marketing Database

Processing Year 2005

Initial Corporation Filings
Processing Years 2003-2005
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2003
Source: 2005 ETA Marketing Database

329,829

371,951

409,791

2004

2005
70

Forms 1120S by Industry
(The North American Industry Classification System - NAICS)
CODE NAICS TITLE COUNT
123,072 114,103 90,708 88,208 84,633 76,860 76,856 68,039 66,326 65,272

%
3% 3% 2% 2% 2% 2% 2% 2% 2% 2%
71

541990 All Other Professional, Scientific, & Technical Services 531390 Other Activities Related to Real Estate 236110 Residential Building Construction 238900 Other Specialty Trade Contractors 531120 Lessors of Nonresidential Buildings 722110 Full-Service Restaurants 812990 All Other Personal Services 531210 Offices of Real Estate Agents & Brokers 621111 Offices of Physicians 541600 Management, Scientific, & Technical Consulting

Three of the top 10 NAICS codes involve real estate returns.
Source: 2005 ETA Marketing Database

Electronic Forms 1120S by Industry
(The North American Industry Classification System - NAICS)
CODE NAICS TITLE COUNT 4,711 4,523 4,395 4,069 3,969 3,801 3,398 3,138 3,040 2,594 % 3% 3% 3% 3% 3% 2% 2% 2% 2% 2%
72

541990 All Other Professional, Scientific, & Technical Services 531390 Other Activities Related to Real Estate 236110 Residential Building Construction 531120 Lessors of Nonresidential Buildings 238900 Other Specialty Trade Contractors 722110 Full-Service Restaurants 812990 All Other Personal Services 621111 Offices of Physicians 531210 Offices of Real Estate Agents & Brokers 524210 Insurance Agencies and Brokerages

* The percentage of all electronic Forms 1120S filed in PY 2005
Source: 2005 ETA Marketing Database

Forms 1120S by Business Operating Division
Total: 3,691,272

LMSB 32,282 (1%)

SBSE 3,658,770 (99%)

TEGE 220 (0%)

73
Source: 2005 ETA Marketing Database

Processing Year 2005

Forms 1120S by Assets & Method
Paper Under $200,000 $200,000 to under $10 Million $10 Million or More Total 2,675,971 830,406 31,021 3,537,398 e-file 111,204 41,686 984 153,874 Total 2,787,175 872,092 32,005 3,691,272

Processing Year 2005
Source: 2005 ETA Marketing Database

74

Source: 2005 ETA Marketing Database

Form 1120S by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

6,598 42,466 34,135 62,914 274,354 93,430 26,020 13,357 493,728 137,007

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

11,211 31,661 20,962 186,203 85,931 28,464 47,665 44,752 79,929 67,339

20,372 New Jersey (NJ) Maine (ME) 117,304 New Mexico (NM) Michigan (MI) Minnesota (MN) 83,144 Nevada (NV) Missouri (MO) 57,930 New York (NY) Mississippi (MS) 22,816 Ohio (OH) Montana (MT) 18,078 Oklahoma ( OK) 107,353 Oregon (OR) North Carolina (NC) 7,505 Pennsylvania (PA) North Dakota (ND) Nebraska (NE) 24,756 Rhode Island (RI) New Hampshire (NH) 11,972 South Carolina (SC)

128,847 17,242 32,026 333,546 113,298 42,055 46,305 135,923 17,517 49,200

South Dakota (SD) 10,781 30,512 Tennessee (TN) Texas (TX) 186,752 Utah (UT) 40,031 Virginia (VA) 87,697 Vermont (VT) 10,665 74,240 Washington (WA) 75 50,327 Wisconsin (WI) West Virginia (WV) 10,551 Wyoming (WY) 9,079

Source: 2005 ETA Marketing Database

e-file Penetration by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

8% 4% 5% 3% 1% 4% 2% 5% 4% 3%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

2% 4% 3% 3% 3% 6% 2% 2% 16% 2%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

2% 26% 5% 5% 4% 6% 3% 9% 7% 4%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

2% 5% 6% 1% 4% 3% 3% 3% 5% 5%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

10% 3% 3% 4% 3% 5% 4% 76 6% 2% 9%

Form 1120/1120S Summary
• Only 12% of 1120 & 14% of 1120S are projected to be filed electronically in 2007. • 38% of 1120 & 33% of 1120S taxpayers are enrolled in EFTPS. • 1120’s have two peak volume filing times: March and September. • SB/SE accounts for 98% of 1120’s. • 8% of 1120 returns have NAICS codes involve in real estate. • 87% of 1120 filers use a preparer.
77

Form 1065 Filers
Return of Partnership Income
Processing Year 2005

Form 1065 Annual Filing Volume
Processing Year 2002-2005
3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2002 2003 2004 2005
79
Source: 2005 ETA Marketing Database

2,704,620 2,241,600 2,372,053 2,510,191

80%
Growth Rate 6% Growth Rate 8%

Growth Rate 6%

Annual Filing Volume for e-file Form 1065
200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 180,368
Processing Year (2001-2005)

95,313 48,937 25,345 8,794 2001 2002 2003 2004 2005
80

Source: 2005 ETA Marketing Database

# of K1’s Associated to 1065 Returns
(where each partner is issued one K-1)
100% 80% 60% 40% 20% 0% e-file Paper Returns 180,368 2,524,247 K-1's 5,137,927 11,247,063
81
Source: 2005 ETA Marketing Database

e-file 7% e-file 31%

Paper 93%

Paper 69%

Note: 5 paper partnerships returns were not included in the totals because the K-1 counts appeared to be incorrect.

In Processing Year 2005, only 7% of all Forms 1065 were filed electronically.
82

Form 1065 Projected Electronic Filing Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

80%

Actual
12% 15% 18% 22% 27%

32%

4%

7%

9%

2004 2005 2006 2007 2008 2009 2010 2011 2012
Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

83

Form 1065 Taxpayers Enrolled in EFTPS
(Electronic Federal Tax Payment System) Processing Year 2005

Enrolled 11%

Not Enrolled 89%

Enrolled (305,124)
Source: 2005 ETA Marketing Database

Not Enrolled (2,399,496)
84

Total Number of Form 1065 Taxpayers Making Payments

Paper & Electronic 0% Electronic Only 0%

Paper Only 100%

Paper Only (65,556) Paper & Electronic (15)
Source: 2005 ETA Marketing Database

Electronic Only (213)
85

e-file Migration Between Filing Options
No Returns 8% e-file 78% Paper 14% 2004 Paper Electronic 2005 No Returns
86

e-file 100%

95,313

78% of Form 1065 e-file Users Remained Loyal
Source: 2005 ETA Marketing Database

Preparer/No Preparer
Total: 2,704,620
No Preparer (383,742) 14%

Preparer (2,320,878) 86%

Form 1065 - Processing Year 2005
87
Source: 2005 ETA Marketing Database

Recommended Target Market for Form 1065 Electronic Filing
3,943 EROs* filing more than 50 e-file 1040 & more than 50 1065 returns filed 625,962 partnership returns *Electronic Return Originators
88
Source: 2004 ETA Preparer Database

There are three forms in the 1065 Series: • Form 1065PTP* • Form 1065B** • Form 1065
In Processing Years 2003, 2004 and 2005, Forms 1065PTP and 1065B comprised less than 1% of all Forms 1065; none were filed electronically.
* Form 1065-PTP: Publicly Traded Partnerships. ** Form 1065-B: US Return of Income for Electing Large Partnerships

89

Form 1065 Monthly Filing Patterns
1200000 1000000 800000 600000 400000 200000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2003
Source: 2005 ETA Marketing Database

Peak volume was 1,051,018 in April 2005.

October 2005 volume was 269,240.

2004

2005
90

e-file Form 1065 Monthly Filing Patterns
70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2003
Source: 2005 ETA Marketing Database

Peak volume was 62,419 in April 2005.

October 2005 volume was 16,104.

2004

2005
91

Fiscal Year Returns vs. Calendar Year Returns
Total: 2,704,620

Fiscal Year 36,011 (1%)

Calendar Year 2,668,609 (99%)

Processing Year 2005
Source: 2005 ETA Marketing Database

92

Initial Partnership Filings
Processing Years 2003-2005
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2003
Source: 2005 ETA Marketing Database

307,100

339,201

384,888

2004

2005
93

Forms 1065 by Business Operating Division
Processing Year 2005

LMSB 85,744 (3%)

Total: 2,704,620

SBSE 2,618,558 (97%)

TEGE 318 (0%)

94
Source: 2005 ETA Marketing Database

Forms 1065 by Industry
(The North American Industry Classification System - NAICS)
CODE 531120 531110 531390 523900 531190 525990 531310 236110 523930 541990 TITLE Lessors of Nonresidential Buildings Lessors of Residential Buildings Other Activities Related to Real Estate Other Financial Investment Act Lessors of Other Real Estate Property Other Financial Vehicles Real Estate Property Managers Residential Building Construction Investment Advice All Other Professional, Scientific 2005 391,776 337,822 220,493 134,648 76,126 56,450 45,099 44,629 42,719 33,750 %* 15% 13% 9% 5% 3% 2% 2% 2% 2% 2%
95

* The percentage of all Forms 1065 filed in PY 2005
Source: 2005 ETA Marketing Database

Electronic Forms 1065 by Industry
(The North American Industry Classification System - NAICS)
CODE TITLE 2005 31,462 27,339 14,783 8,774 5,831 3,407 3,284 2,754 2,540 2,336 %* 18% 16% 8% 5% 3% 2% 2% 2% 1% 1%
96

531120 Lessors of Nonresidential Buildings 531110 Lessors of Residential Buildings 531390 Other Activities Related to Real Estate 523900 Other Financial Investment Act 531190 Lessors of Other Real Estate Property 531310 Real Estate Property Managers 236110 Residential Building Construction 523930 Investment Advice 525990 Other Financial Vehicles 211110 Oil and Gas Extraction

* The percentage of all electronic Forms 1065 filed in PY 2005
Source: 2005 ETA Marketing Database

Partnership Start Dates 1900-2005 Total: 2,704,620
Undefined 6% 2000 or Earlier 52%

2001 or Later 42%
2001 or Later (1,122,875) Undefined (161,511) 2000 or Earlier (1,420,234)

Processing Year 2005
Source: 2005 ETA Marketing Database

97

Number of Partners
Three 17% Two 54% Four 9%

Five or More 20%

Two (1,464,720)

Three (453,087)

Four (257,990)

Five or More (528,823)

Processing Year 2005
Source: 2005 ETA Marketing Database

98

Filers With More Than 100 Partners & K-1’s
(where each partner is issued one K-1)

Partnerships with more than 100 Partners filed 5,530 returns & 5,058,436 K-1’s

>100

Partnerships with 100 or fewer Partners filed 2,699,085 returns & 11,326,554 K-1’s
*Electronic filing is mandated for Forms 1065 with more than 100 partners.
Source: 2005 ETA Marketing Database

99

Partnership K-1’s
(where each partner is issued one K-1) Number of Partners 2 3 4 5 - 10 11 - 100 101 - 1,000 >1,000 Total
Source: 2005 ETA Marketing Database

Number of Returns 1,464,720 453,087 257,990 364,493 158,795 4,936 594 2,704,615

Number of K-1’s 2,927,681 1,359,261 1,031,960 2,367,910 3,639,742 1,111,109 3,947,327 16,384,990

Percent of K-1s 17.87% 8.30% 6.30% 14.45% 22.21% 6.78% 24.09% 100.00%
100

Note: 5 paper partnerships returns were not included in the totals because the K-1 counts appeared to be incorrect

Source: 2005 ETA Marketing Database

Form 1065 by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

5,566 34,284 21,499 61,769 309,499 72,231 55,879 10,678 123,959 66,070

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

8,900 26,971 18,044 91,145 44,449 27,409 33,273 39,202 54,336 53,947

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

8,967 91,062 49,267 51,895 18,496 13,373 69,917 8,410 18,371 12,934

112,704 South Dakota (SD) 9,145 New Jersey (NJ) 15,536 Tennessee (TN) 54,392 New Mexico (NM) Nevada (NV) 35,977 Texas (TX) 228,098 New York (NY) 184,915 Utah (UT) 45,068 Ohio (OH) 95,513 Virginia (VA) 62,610 Oklahoma ( OK) 32,206 Vermont (VT) 5,042 36,462 Washington (WA) 61,513 Oregon (OR) 101 95,270 Wisconsin (WI) 52,738 Pennsylvania (PA) Rhode Island (RI) 9,226 West Virginia (WV) 10,933 South Carolina (SC) 35,024 Wyoming (WY) 9,093

Source: 2005 ETA Marketing Database

e-file Penetration by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

14% 4% 5% 4% 5% 5% 4% 5% 4% 5%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

3% 7% 9% 5% 4% 8% 5% 6% 20% 3%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

4% 30% 9% 7% 7% 11% 5% 15% 9% 5%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

7% 11% 7% 3% 6% 5% 7% 5% 7% 7%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

15% 6% 6% 6% 4% 7% 7% 102 10% 3% 11%

Form 1065 Summary
• 1065’s have been e-filed since 2000, yet only 12% of all 1065’s are projected to be e-filed in 2007. • 11% of all 1065 taxpayers are enrolled in EFTPS. • 1065 filers have a 78% e-file loyalty rate. • 1065’s have two peak volume filing times: April and October. • SB/SE accounts for 97% of 1065’s. • 1,071,316 (42%) of 1065 returns represent real estate related activities. • 86% of filers use preparers. • 42% of partnerships started in 2001 or later. • 80% of filers have fewer than five partners.
103

Form 1041 Filers
Fiduciary Income Tax Return
Processing Year 2005

Form 1041 Annual Filing Volume
Processing Years 2003-2005
4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2003 2004 2005
48,439 1,250,920 1,325,680 1,350,649 2,370,332 2,362,368 2,328,613

80%

e-file

Magnetic Media*

Paper

*The database does not break down magnetic media by diskette, modem
or magnetic tape. This option was not available after June 30, 2003.
105
Source: 2005 ETA Marketing Database

Form 1041 Taxpayers Enrolled in EFTPS (Electronic Federal Tax Payment System)
Processing Year 2005

Enrolled 13%

Not Enrolled 87%

Enrolled (492,234)
Source: 2005 ETA Marketing Database

Not Enrolled (3,187,028)
106

Total Number of Form 1041 Taxpayers Making Payments
Paper & Electronic 4% Paper Only 76% Electronic Only 20%

Paper Only (597,119) Paper & Electronic (32,194)

Electronic Only (166,124)

107
Source: 2005 ETA Marketing Database

Form 1041 Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 37%

80%
Actual
38% 39% 40% 41% 41% 42% 43%

2005

2006

2007

2008

2009

2010

2011

2012
108

Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

e-file Migration Between Filing Options
No Returns 9%

Electronic 100%

1,250,920

Electronic 88%

Paper 3%

2004
Paper
Source: 2005 ETA Marketing Database

2005
Electronic No Returns
109

Preparer/No Preparer
Total: 3,679,262

Preparer (2,175,682) 59%

No Preparer (1,503,580) 41%

Processing Year 2005
110
Source: 2005 ETA Marketing Database

Self & Paid Preparation by Filing Method
2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Preparer

1,824,278 87% 275,384 13%
No Preparer

504,335 32% 1,075,265 68%

e-file

Paper
111

Processing Year 2005
Source: 2005 ETA Marketing Database

These are three forms in the 1041 Series:
• Form 1041: 2,325,075 • Form 1041 e-file:1,350,649 • Form 1041QFT*: 3,538

*U.S. Income Tax Return for Qualified Funeral Trusts
112
Source: 2005 ETA Marketing Database

Form 1041: Monthly Filing Patterns
1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0
2003
Source: 2005 ETA Marketing Database

Peak volume was 1,557,739 in April 2005.

October 2005 volume was 158,124.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 2005
113

e-file Form 1041 Monthly Filing Patterns
1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
Peak volume was 906,353 in March 2005.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
PY 2003
Source: 2005 ETA Marketing Database

PY 2004

PY 2005

114

Fiscal Year Returns vs. Calendar Year Returns
Total: 3,679,262

Fiscal Year 200,740 (5%)

Calendar Year 3,478,522 (95%)

Processing Year 2005
115
Source: 2005 ETA Marketing Database

Forms 1041 by Business Operating Division
Total: 3,679,262
LMSB76 (0%) SBSE 3,665,579 (100%) TEGE 13,607 (0%)

Processing Year 2005
Source: 2005 ETA Marketing Database

116

Forms 1041 by Industry
(The North American Industry Classification System - NAICS)
CODE TITLE 2004 7,018 1,736 681 475 111 175 188 159 95 73 2005 6,703 2,552 715 431 273 259 185 171 107 104
117

813000 Religious, Grantmaking, Civic, Professional, & Similar Organizations 525000 Funds, Trusts, & Other Financial Vehicles 525920 Trusts, Estates, & Agency Accounts 522294 Secondary Market Financing 522292 Real Estate Credit 525110 Pension Funds 523930 Investment Advice 813211 Grantmaking Foundations 525990 Other Financial Vehicles 523991 Trust, Fiduciary, and Custody Activities

No NAICS code accounted for 1% in Processing Year 2005.
Source: 2005 ETA Marketing Database

Source: 2005 ETA Marketing Database

Form 1041 by State

*

* District of Columbia 463,450
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

3,266 27,484 16,807 40,076 319,899 52,948 44,905 24,256 170,579 42,594

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

13,058 49,942 7,564 200,284 48,346 26,237 33,065 18,982 140,145 57,461

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

25,864 94,066 50,302 80,310 11,167 7,124 67,533 5,961 23,374 13,380

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

131,212 10,911 17,444 307,346 175,575 81,063 33,264 175,722 40,443 20,644

9,697 South Dakota (SD) 40,499 Tennessee (TN) Texas (TX) 191,897 Utah (UT) 13,879 Virginia (VA) 68,532 Vermont (VT) 9,235 58,989 Washington (WA) 118 94,190 Wisconsin (WI) West Virginia (WV) 10,767 Wyoming (WY) 5,792

Source: 2005 ETA Marketing Database

e-file Penetration by State

*

* District of Columbia 98%
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

2% 6% 4% 20% 27% 13% 29% 24% 13% 14%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

13% 3% 2% 15% 10% 8% 7% 8% 31% 21%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

21% 14% 17% 10% 3% 1% 10% 1% 5% 23%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

29% 4% 19% 24% 16% 7% 16% 18% 33% 8%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

1% 9% 11% 10% 14% 12% 11% 119 10% 3% 1%

Form 1041 Summary
• 39% of all 1041’s are projected to be filed electronically in 2007. • 13% of all 1041 taxpayers are enrolled in EFTPS. • 1041 e-filers have an 88% loyalty rate. • Over 86% of all 1041’s are filed by the end of April. • SB/SE accounts for 100% of 1041’s. • No one NAICS Code accounted for 1% of 1041’s. • 59% of 1041 filers use a preparer. • The top two e-file transmitters account for 23% of all 1041’s. • The top 10 Form 1041 preparers collectively filed 69% of their returns electronically .
120

Form 990 Filers
Exempt Organization Income Tax Return Processing Year 2005

Form 990 Annual Filing Volume
Processing Years 2003-2005
600,000 500,000 400,000 300,000 200,000 100,000 0 2003
Source: 2005 ETA Marketing Database

542,759

526,510

533,814

2004

2005
122

Annual Filing Volume for e-file Form 990
5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
Processing Year (2003-2005)

4,462

656 0 2003 2004 2005
123

Source: 2005 ETA Marketing Database

In Processing Year 2005, fewer than 1% of all Forms 990 were e-filed.
124

Total Number of Form 990 Taxpayers Making Payments
Paper & Electronic 4% Electronic Only 10% Paper Only 86%

Paper Only (65,559) Paper & Electronic (2,793)
Source: 2005 ETA Marketing Database

Electronic Only (7,868)

125

Source: 2005 ETA Marketing Database

Form 990 Taxpayers Impacted by Mandating e-filing for Asset Thresholds
25,000 20,000 15,000 10,000 5,000 0 3,682 21,870

Total Assets >100 Million

2006 Year

Total Assets >10 Million

2007 Year

The electronic filing requirements only apply to entities that file at least 250 returns, including income tax, excise 126 tax, information and employment tax returns, during a calendar year.

Form 990 by Series
Processing Years 2003-2005
600,000 500,000 400,000

398,961
300,000 200,000 100,000 0 2003

388,201

387,977

143,798

138,309
2004

145,837
2005

Form 990EZ
Source: 2005 ETA Marketing Database

Form 990
127

Form 990: Implementation Schedule
Started 2/23/2004

Modernized e-File Continues

Paper Continues

Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec2003 2004 2004 2004 2004 2005 2005 2005 2005
128

Form 990 Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1% 1% 4% 6% 7%

80%

Actual
13%

9%

11%

2005

2006

2007

2008

2009

2010

2011

2012
129

Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

Form 990: Monthly Filing Patterns
120,000 100,000 80,000 60,000 40,000 20,000 0
2003
Source: 2005 ETA Marketing Database

Peak volume was 104,363 in May 2005.

November 2005 volume was 37,110.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 2005
130

e-file Form 990 Monthly Filing Patterns
1,200 1,000 800 600 400 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004
Source: 2005 ETA Marketing Database

Peak volume was 981 in May 2005.

2005
131

Fiscal Year Returns vs. Calendar Year Returns
Total: 533,814

Fiscal Year 235,526 (44%)

Calendar Year 298,288 (56%)

Processing Year 2005
Source: 2005 ETA Marketing Database

132

Source: 2005 ETA Marketing Database

Volume by TE/GE Areas (990)
Processing Year 2005
(Includes Alaska and Hawaii)

Northea st Area Great Lakes Area MidAtlantic Area Gulf Coast Area

Pacific Coast Area

NORTH EAST Total e-file 89,969 635

MIDATLANTIC 106,193 892

GULF COAST 117,908 914

GREAT LAKES 100,660 1,203

PACIFIC COAST OTHER* 117,850 815 1,234 3133

*Other includes international, and miscellaneous returns that could not apply to an area.

Source: 2005 ETA Marketing Database

Form 990 by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

2,132 6,170 4,358 7,301 58,270 10,001 8,218 1,776 22,999 11,524

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

2,547 7,656 2,506 22,826 13,078 6,015 6,388 6,002 15,890 11,350

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

3,543 16,845 12,852 11,644 3,629 3,006 14,364 2,098 4,333 3,225

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

15,854 3,593 2,520 37,197 22,848 5,788 8,535 25,794 3,543 5,699

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

2,190 8,775 31,004 2,908 14,779 2,499 12,993 134 12,394 3,724 1,538

Source: 2005 ETA Marketing Database

e-file Penetration by State

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

3% 1% 0% 0% 0% 1% 1% 1% 1% 0%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

1% 1% 1% 1% 1% 1% 1% 0% 1% 1%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

0% 3% 1% 1% 0% 1% 1% 0% 2% 0%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

1% 2% 1% 0% 1% 1% 1% 1% 0% 0%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

1% 1% 1% 1% 1% 2% 1% 135 1% 0% 1%

Form 990 Summary
• 4% of all 990’s are projected to be filed electronically in 2007. • 990’s have two peak volume filing times: May and November. • 990’s are TE/GE accounts. • One NAICS Code (813000: Religious, Grantmaking, Civic, Professional, & Similar Organizations) accounts for 35% of all 990’s. • There is no preparer information available for paper 990 returns.

136

Form 941 Filers
Employer's Quarterly Federal Tax Return
Processing Year 2005

Form 941: 2004 Implementation Schedule
e-file*
*e-file includes Electronic, On-Line & Extensible Mark-Up Language (XML).

Continues Telefile

Magnetic Media
Ended February 2004

Continues Paper Paper

Aug2003

Oct 2003

Dec2003

Feb2004

Apr2004

Jun2004

Aug2004

Oct2004

Dec138 2004

Form 941: 2005 Implementation Schedule
e-file*
*e-file includes Electronic, On-Line & Extensible Mark-Up Language (XML).

Continues Telefile
will be discontinue August 2005

Continues Paper

Feb2005

Apr2005

Jun2005

Aug2005

Oct2005

Dec2005

Feb2006

Apr2006

Jun139 2006

Form 941 Annual Filing Volume
Processing Years 2005
30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 4,570,727 0 4,909,232 260,730

80%
19,443,139 19,795,393

2004 Electronic
Source: 2005 ETA Marketing Database

2005 Paper Magnetic Media
140

In Processing Year 2005, fewer than 21% of all Forms 941 filed were e-filed.
141

Form 941 Projected Electronic Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012
142

80%

Actual
24% 26% 27% 29% 30% 32%

20%

22%

Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

Annual Filing Volume for Electronically Filed Forms 941
5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0
On-Line 186,437 Telefile 838,014 Telefile 597,433 On-Line 4,210 XML 1,804,182 Electronic 1,742,094 XML 3,911,525 Electronic 396,064

2004
Source: 2005 ETA Marketing Database

2005

143

XML is the Extensible Markup Language electronic format

Forms 941 Volume – 3rd Quarter
Electronic 0%

Total: 5,692,928
Paper 81%

XML 19%

On-Line 0%

XML (1,100,665)

Electronic (7,186)

Paper (4,583,275)

On-Line (1,802)

Third Quarter 2005
Source: 2005 ETA Marketing Database

144

Form 941 Taxpayers Enrolled in EFTPS (Electronic Federal Tax Payment System)
Processing Year 2005

Enrolled 46%

Not Enrolled 54%

Enrolled (11,445,844)
Source: 2005 ETA Marketing Database

Not Enrolled (13,258,781)
145

Total Number of 941 Series Taxpayers Making Payments
Paper & Electronic 10% Paper Only 56%

Electronic Only 34% Paper Only (3,525,328) Paper & Electronic (628,685)
Source: 2005 ETA Marketing Database

Electronic Only (2,115,791)
146

Telefile Migration to New Filing Options
XML 1% No Returns 11% Electronically 0% On-Line 0% XML 1,147 Electronically 845 Paper 161,515 No Returns 20,491 On-Line 786 Paper 88%

1.5% of Telefile Users Migrated to e-file
Source: 2005 ETA Marketing Database

147

There are 6 forms in the 941 Series:
• Form 941: Employer's Quarterly Federal Tax Return • Form 941PR: Employer's Quarterly Federal Tax Return (Puerto Rican Version) • Form 941C: Supporting Statement To Correct Information Previously Reported on Employees Tax Return • Form 941C(PR): Statement to Correct Information (Puerto Rican Version) • Form 941M: Employer’s Monthly Federal Tax Return • Form 941SS: Employer's Quarterly Federal Tax Return (For employers in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the Virgin Islands to report social security and Medicare taxes for their workers)

148

Counts of the forms in the 941 Series:
• Form 941, 941PR, 941C, 941C(PR), 941M, 941SS, 941TEL : 20,392,826 • Form 941 e-file :2,611,125 • Form 941Online: 1,700,674

149
Source: 2005 ETA Marketing Database

Filing Patterns: Form 941 by Cycle Posted
1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51
2003
Source: 2005 ETA Marketing Database

Peak volume was 1,153,235 in cycle 25 of 2005.

2004

2005

150

Filing Patterns: Form 941 by Method & Cycle Posted
1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 3
Peak volume was 923,194 in cycle 44 for XML in 2005.

6

9 12 15 18 21 24 27 30 33 36 39 42 45 48 51
Telefile On-Line XML Eelectronically
151

Source: 2005 ETA Marketing Database

Forms 941 by Business Operating Division
Processing Year 2005

LMSB 505,673 (2%)

Total: 24,704,625

TE/GE 1,931,090 (8%)

SB/SE 22,267,862 (90%)

152
Source: 2005 ETA Marketing Database

All Forms 941 by Industry
(The North American Industry Classification System - NAICS)
NAICS TITLE 2005 514,686 480,166 469,579 457,986 416,427 396,049 337,404 278,031 270,753 267,756 % 2% 2% 2% 2% 2% 2% 1% 1% 1% 1%
153

621111 Offices of Physicians 813000 Religious, Civic, & Similar Organizations 722110 Full-Service Restaurants All Other Professional, Scientific, & Technical 541990 Services 238900 Other Special Trade Contractor 541110 Offices of Lawyers 236110 Residential Building Construction 524210 Insurance Agencies and Brokerages 812990 All Other Personal Services 621210 Offices of Dentists

* The percentage of all Forms 941 filed in PY 2005.
Source: 2005 ETA Marketing Database

Source: 2005 ETA Marketing Database

Form 941 by State

*

* District of Columbia 57,738
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

65,100 313,245 212,621 411,448 2,825,560 507,113 309,945 79,830 1,684,341 704,369

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

102,002 264,201 146,125 1,071,860 469,411 257,486 293,094 319,465 576,263 446,229

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

139,726 793,904 505,399 510,406 184,778 123,081 685,272 74,906 172,695 126,418

849,077 South Dakota (SD) 87,792 New Jersey (NJ) 142,717 Tennessee (TN) 405,700 New Mexico (NM) Nevada (NV) 181,460 Texas (TX) 1,551,461 New York (NY) 1,798,309 Utah (UT) 218,910 Ohio (OH) 855,630 Virginia (VA) 598,269 Oklahoma ( OK) 293,439 Vermont (VT) 77,051 350,946 Washington (WA) 579,669 Oregon (OR) 980,000 Wisconsin (WI) 154 478,949 Pennsylvania (PA) Rhode Island (RI) 102,441 West Virginia (WV) 129,610 South Carolina (SC) 324,251 Wyoming (WY) 67,109

Source: 2005 ETA Marketing Database

e-file Penetration by State

* District of Columbia 46%
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

5% 9% 7% 24% 31% 18% 33% 27% 17% 17%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

18% 7% 6% 18% 14% 12% 10% 11% 37% 27%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

23% 17% 24% 14% 5% 5% 14% 5% 9% 26%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

33% 8% 22% 27% 20% 10% 21% 21% 40% 10%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

6% 13% 15% 14% 18% 14% 16% 155 15% 6% 6%

Zero Wage Returns
No Withholding, No Tax Liability, No Deposits, & No Taxes to Report Total 941 Population Total 24,704,625 Zero Wage returns 2,515,642

% 10%

Form 941 Even Return Filers
No Balance or Refund Due
Total 941 Population Total 24,704,625 Number of even returns 18,653,211 % 76%
156

Processing Year 2005
Source: 2005 ETA Marketing Database

Form 941 Summary
• 24% of all 941’s are projected to be filed electronically in 2007. • 46% of all 941 taxpayers are enrolled in EFTPS • SB/SE accounts for 90% of 941’s. • 941’s are not dominated by any industry. • 76% of all 941 returns are even returns. • There is no preparer information available for paper 941 returns. • The top two e-file/ Magnetic Media Reporting agents account for 64% of all 941’s. • Telefile 941 was discontinued in August 2005.
157

Form 940 Filers
Employer's Annual Federal Unemployment Tax Return
Processing Year 2005

Form 940 Annual Filing Volume
Processing Years 2003-2005
3,569 357,843 462,012 351,520 472,531

4,952,779 4,826,838 4,811,972

17

60,797

948,320

2003
XML*
Source: 2005 ETA Marketing Database

Paper

2004 Magnetic Media

2005 Electronic
159

* XML - modernized e-file/ prepared by either a preparer or taxpayer Electronic - traditional e-file/preparer prepared Online - traditional e-file/taxpayer prepared

Form 940: Implementation Schedule
e-file*
*e-file includes Electronic, On-Line & Extensible Mark-Up Language (XML).

Continues Magnetic Media
Ended February 2004

Paper Continues
Dec - Mar - Jun2003 2004 2004 Sep2004 Dec2004 Mar2005 Jun2005 Sep2005 Dec2005
160

In Processing Year 2005, 16% of all Forms 940 were filed electronically.

161

Form 940 Projected e-file Penetration Rate
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012
162

80%

Actual
24%

16%

17%

18%

19%

20%

22%

23%

Calendar Year Return Projections by State: Document 6149 (Rev. 12-2005) Produced by Projections and Forecasting Group (RAS:R)

Form 940: Electronic Returns
Processing Year (2002-2005)
1,000,000 800,000 600,000 400,000 200,000 0
2002 17 2003 60,797 2004 3,569 2005 320,259 357,843 351,520 948,320

Traditional e-file
Source: 2005 ETA Marketing Database

XML
163

Form 940 Taxpayers Enrolled in EFTPS (Electronic Federal Tax Payment System)
Processing Year 2005
Enrolled 46% Not Enrolled 54%
Enrolled (2,714,676)
Source: 2005 ETA Marketing Database

Not Enrolled (3,189,992)

164

Total Number of Form 940 Taxpayers Making Payments
Paper & Electronic 5%

Electronic Only 37%

Paper Only 58%

Paper Only (3,073,522) Paper & Electronic (240,392)
Source: 2005 ETA Marketing Database

Electronic Only (1,905,035)
165

Electronic Migration Between Filing Options
No Returns 8%

Electronic 100%

Electronic 85%

412,317
Paper 7%

2004
Paper Electronic

2005
No Returns

85% of Form 940 electronic users remained loyal.
Source: 2005 ETA Marketing Database

166

Magnetic Media Migration Between Filing Options
No Returns 9% Magnetic Media 100% Electronic 85%

472,531

Paper 6%

2004
Paper
Source: 2005 ETA Marketing Database

2005
Electronic Mag No Returns
167

There are three forms in the 940 Series:
• Form 940EZ • Form 940 e-file • Form 940 & 940PR*
In Processing Years 2003, 2004 and 2005, electronic filing was not available for Forms 940EZ and 940PR*.
*Employer's Annual Federal Employment Tax Return (Puerto Rican Version)
168

Forms 940 by Series
Processing Year 2005

940 e-file 951,889

940EZ 3,675,664

Form 940 & Form 940PR 1,277,115

Total: 5,904,668
Source: 2005 ETA Marketing Database

169

Filing Patterns Form 940 by Cycle Posted
1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 3 6

Peak volume was 846,198 in cycle 7 of 2005.

9 12 15 18 21 24 27 30 33 36 39 42 45 48 51
2003 2004 2005
170

Source: 2005 ETA Marketing Database

Filing Patterns for e-file Form 940 by Cycle Posted
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 2003
Source: 2005 ETA Marketing Database

Peak volume was 403,220 in cycle 7 of 2005.

2004

2005

171

Forms 940 by Business Operating Division
Processing Year 2005

LMSB 134,825 2% TEGE 95,294 2%

Total: 5,904,668

SBSE 5,674,549 96%

172
Source: 2005 ETA Marketing Database

Forms 940 by Industry
(The North American Industry Classification System - NAICS)
CODE 621111 722110 541990 238900 541110 236110 524210 722210 812990 621210 Offices of Physicians Full-Service Restaurants All Other Professional, Scientific, & Technical Services Other Special Trade Contractor Offices of Lawyers Residential Building Construction Insurance Agencies & Brokerages Limited-Service Eating Places All Other Personal Services Offices of Dentists 95,530 97,491 72,309 67,601 66,333 66,719 64,567 107,314 101,975 85,893 71,019 70,511 70,494 68,387 2% 2% 1% 1% 1% 1% 1% TITLE 2004 128,485 120,269 114,974 2005 132,753 126,444 119,298 %* 2% 2% 2%

* The percentage of all Forms 940 filed in PY 2005.
Source: 2005 ETA Marketing Database

173

Electronic Forms 940 by Industry
(The North American Industry Classification System - NAICS)
CODE 621111 541990 722110 541110 621210 524210 238900 531390 541519 722210 TITLE Offices of Physicians All Other Professional, Scientific, & Technical Services Full-Service Restaurants Offices of Lawyers Offices of Dentists Insurance Agencies & Brokerages Other Special Trade Contractor Other Activities Related to Real Estate Other Computer Related Services Limited-Service Eating Places 2004 16,712 12,380 11,062 11,362 8,514 6,588 6,509 5,763 6,174 4,749 2005 33,559 26,297 26,283 23,856 16,797 14,840 14,114 13,967 12,911 12,288 %* 10% 8% 8% 7% 5% 4% 4% 4% 4% 4%
174

* The percentage of all electronic Forms 940 filed in Processing Year 2005.
Source: 2005 ETA Marketing Database

Source: 2005 ETA Marketing Database

Form 940 by State

*

Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

14,845 70,947 49,684 100,176 709,527 121,064 73,877 19,518 410,722 165,820

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

24,784 60,861 35,014 252,916 108,794 58,582 67,255 76,970 149,830 106,308

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

32,511 189,026 117,842 120,452 42,844 28,593 159,545 15,790 39,548 29,772

* District of Columbia 11,706 209,259 South Dakota (SD) 19,341 New Jersey (NJ) 33,136 Tennessee (TN) 93,375 New Mexico (NM) 45,398 Texas (TX) 370,898 Nevada (NV) 433,219 Utah (UT) 53,760 New York (NY) 199,690 Virginia (VA) 139,435 Ohio (OH) 66,849 Vermont (VT) 17,417 Oklahoma ( OK) 84,512 Washington (WA) 139,537 Oregon (OR) 231,152 Wisconsin (WI) 111,827 Pennsylvania (PA) 175 28,111 West Virginia (WV) 28,703 Rhode Island (RI) 15,536 South Carolina (SC) 74,898 Wyoming (WY)

Source: 2005 ETA Marketing Database

e-file Penetration by State

*

* District of Columbia 36%
Alaska (AK) Alabama (AL) Arkansas (AR) Arizona (AZ) California (CA) Colorado (CO) Connecticut (CT) Delaware (DE) Florida (FL) Georgia (GA)

2% 6% 4% 20% 27% 13% 29% 24% 13% 14%

Hawaii (HI) Iowa (IA) Idaho (ID) Illinois (IL) Indiana (IN) Kansas (KS) Kentucky (KY) Louisiana (LA) Massachusetts (MA) Maryland (MD)

13% 3% 2% 15% 10% 8% 7% 8% 31% 21%

Maine (ME) Michigan (MI) Minnesota (MN) Missouri (MO) Mississippi (MS) Montana (MT) North Carolina (NC) North Dakota (ND) Nebraska (NE) New Hampshire (NH)

21% 14% 17% 10% 3% 1% 10% 1% 5% 23%

New Jersey (NJ) New Mexico (NM) Nevada (NV) New York (NY) Ohio (OH) Oklahoma ( OK) Oregon (OR) Pennsylvania (PA) Rhode Island (RI) South Carolina (SC)

29% 4% 19% 24% 16% 7% 16% 18% 33% 8%

South Dakota (SD) Tennessee (TN) Texas (TX) Utah (UT) Virginia (VA) Vermont (VT) Washington (WA) Wisconsin (WI) West Virginia (WV) Wyoming (WY)

1% 9% 11% 10% 14% 12% 11% 176 10% 3% 1%

Forms 940 by Balance Due & Overpayment
Processing Year 2005
Refund 156,496 3%

Even Returns 3,585,827 60%

Balance Due 2,162,345 37%

Total: 5,904,668
177
Source: 2005 ETA Marketing Database

Average 940 Filers for Balance Due & Overpayment
Processing Year 2005 2004 2003 2002
Source: 2005 ETA Marketing Database

Average Refund $380 $346 $532 $400

Average Balance Due $230 $362 $212 $208
178

Form 940 Summary
• 18% of all 940’s are projected to be filed electronically in 2007. • 46% of all 940 taxpayers are enrolled in EFTPS. • 940 filers have an 85% e-file loyalty rate. • Over 94% of all 940’s are filed by April 15th • SB/SE accounts for 96% of all 940’s. • 940’s are not dominated by any industry. • Only 3% of 940’s result in a refund. • There is no preparer information available for paper 940 returns. • The top two e-file/ Magnetic Media preparers account for 13% of all 940’s.
179