Tax Crusader

Because of Terence Lutes, today most taxpayers file electronically.

When Terence Lutes was trying to convince taxpayers to file electronically in early 2002, he and his team launched an ad campaign featuring a lone employee working late at the office while his wife waited patiently at home The message: If you'd e-filed your returns, you'd be done by now.

Apparently it worked. This year, for the first time, more than half of all taxpayers filed electronically. The associate chief information officer at the Internal Revenue Service, Lutes also persuaded tax service companies like H&R Block and Intuit Inc. to promote the system. "It's no different than when an Amazon teams up with a Toys 'R' Us or Nordstrom," the 28-year IRS veteran says.

Taxpayers have been able to file electronically since the mid-1980s, but the process was burdensome until Lutes and his team instituted electronic signatures, online payment and Free File, which allowed those who qualify to file electronically at no cost through tax-preparing companies.

"It was the greatest turnaround that I ever saw of a problem headed for a train wreck," says former IRS Commissioner Charles Rossotti of the tense negotiations between the IRS and tax service companies over Free File. "The only person standing up for the taxpayer was Terry Lutes."

Both industry and government leaders say Lutes transformed an adversarial relationship into a productive, cordial one. "We treated them like bratty teenagers and were always trying to catch them at stuff, and they thought we were slow, plodding bureaucrats," says Stephen Holden, assistant professor of information systems at the University of Maryland, Baltimore County, and a former colleague at the IRS. "That all changed with Terry," he says.

As director of the Electronic Tax Administration, Lutes, who graduated from Eastern Kentucky University, frequently spoke to industry groups and asked for feedback on ideas. He even took the occasional weekend phone call while coaching his son's baseball game.

For Lutes, e-filing is important not only because it saves the agency nearly $2 per return. "What taxpayer cares if they save the IRS $2? We really focus on the benefit to the taxpayers," says Lutes. Those benefits include getting refunds faster and reducing errors that result in mailing notices to taxpayers.

Without Lutes, says Eddie Feinstein, a retired vice president of H&R Block, "instead of having tens of millions of returns filed today, we would have been a lot slower."