Discussion:Mandatory e-File

taxbilly

We have a recent discussion on Hedge Fund K-1s that often contain admonitions that such and such form must be filed [926, 8621] which my software does not even include, and which do not appear on the list of forms to attach to 8453. This year for one client, we efiled in September then amended before October 15th to include 16 Forms 8621.

I think amended returns will be included, but I can't remember all of the details. The larger question is, will our software be ready? I've wanted to e-file 1041's for years, but ProSeries doesn't support it.

I'm too busy to research today, but perhaps someone can find a link to MeF enhancements?

What effect does this have on RIA’s “no sanction” statement?

taxbilly

Second, I have no idea what the IRS receives on an efile. I have things in my software (depreciation schedules, client notes, etc) that I would prefer the IRS didn't see. I have no way of knowing whether or not this information is sent to the IRS. I presume the software companies are smart enough to program their software to not send data that isn't required, but based on my dealings with Lacerte, i'm not 100% certain. When I send the IRS a paper return, I know exactly what they got and what the didn't. Third, I am not responsible for my clients compliance. If I prepare a paper return and the client doesn't want to file it or is irresponsible and doesn't file on time, it's not my problem. The efiling mandate forces me to make sure my clients file on time. Fourth, it makes life easier for the IRS. They are basically shifting their workload onto the preparer community. I am never in favor of doing something to help the IRS process a return faster or better unless it helps my client. Fifth, and this is my Libertarianism showing, I resent the government removing a right of my clients. Right now you have the right to file a paper return. Next year you won't. This is just another government mandate stripping away individual liberties. I realize that I'm in a minority with these views, but I felt the need to vent. Maybe some of you efilers will see the light and change your ways.

BJeter- some software packages are now including e-filing for no additional charge. With this new mandate, I would imagine they will all become like that in the next few years. Of course, ProSeries did raise their base price when they did that. Also, the software companies have assured me over and over again that the IRS does not see schedules, notes, etc- but who knows for sure.

Now of course if only the 1 million plus FBARs that are due could be efiled!

As far as making the IRS' job easier, shouldn't that be considered a good thing? If the IRS is more efficient, it should come back to taxpayers in reduced costs or some other improvement. I don't necessarily see that as being bad.

Bjeter, with most states already requiring preparers to e-file individual returns and more coming online it is better to go with the trend then to fight it.

Black-and-white TV

Oldsmobiles

Pencil and Paper

Sayonara and Fond Adieu...

I used pens and white-out.

Big Pink Eraser,

Pabst Blue Ribbon.

The cost of the process isn't even a big reason why I hate efiling. My bigger concerns were expressed in being responsible for my clients filing, the government trampling on individual rights and not knowing what the IRS is getting. I had an IRS agent tell me that on S Corp and Partnership efiles, the statement for other deductions was not even transmitted, just the total was. This resulted in numerous desk audits to figure out why "Other" was such a large number. I wonder how many practitioners just assumed this detail was transmitted. This is just one illustration of the shortcomings of efiling.

Natalie, unfortunately I don't believe improving the IRS efficiency will result in lower costs for taxpayers or better service. I've never heard of a government agency reducing its budget, so it's unlikely lower costs will materialize. However, if the IRS saves money and time as a result of increased efiling, I suspect the additional time and money will be used to increase audits, rather than assist taxpayers.

increased audits increases compliance which means that fewer people cheat which means more people pay their fair share

Going paperless carries risk both for internal and client review. If I am going to e-file a return I still print a paper copy for my files and send a photo to client. I instruct client to sign consent only after review

Dennis, what studies are you referring to? I've never seen anything that says there's less comprehension with electronic media.

And I agree with Kevin's statement about more compliance, etc.

would be one. Basically you are talking about almost a completely different skill set. How many times have you seen it here? Just the other day someone cited Canadian tax law because he misread the article he posted a link to.

Personally I have found review after printing far more effective and a final review while copying and collating not something I would want to give up.

This will only save on the paper for the "filing" copy - nothing else!

As Dennis said: "Personally I have found review after printing far more effective and a final review while copying and collating not something I would want to give up." This may be "old" school but it is what it is.

What a back door method of forcing this issue that "they" knew would not be fully accepted for some time to come. Now "they" will boast how the percentage of e-filed returns is almost 100%.

Dennis, that is one heck of a report that will have to be studied later when I have more time to read it.

What efiling has done is put the onus back on me....did the client send the 8879.....why was this return rejected. So it is probably a zero sum game.....we process returns faster but the headaches have moved to a new department.

I don't think it should be mandatory. We shall see if the software providers (mine) continue with free efiling once this is in place.

Your wife is a special person to deal with all of that but as we also know it is just part of the business. I do not copy any returns, I have the program print them in order to eliminate the problems your talking about. And since you have done this for a while - for you to say this is probably "a zero sum game...." sounds to me like e-filing saves no real time at all. I would rather have headaches with the paper than with clients. Some of my clients just hate "doing taxes" and now I am going to need to call them because they forget to sign and send me back a silly piece of paper - more fun times.

I also pay for postage but I'll bet a dollar - I have fewer returns than you have and postage only costs me $1,000 a year - not a big deal. From what I gather - Lacerte does not do this for free but then again, I am not totally sure.

Natalie - this beef is not with you so please do not take this wrong - it is just my opinion.... Writing a congress "person" who's only job is to get reelected, who are the same ones who have spent the better part of a year working on passing a health care bill that the majority DOES NOT WANT and they will not listen - is a fricken waste of time. Like they are going to listen to anyone about mandatory e-filing. If it was such a great deal for everybody - why did they have to make it mandatory??? I think I stumbled onto something here.... They are just shifting the burden of costs on the taxpayer and the professionals who's job it is to assist the taxpayers stay in compliance with the tax laws - but yes at an additional mandated cost.

As for e-filing, I'll take it just about any day over paper filing. I have had a couple of extensions rejected, but the time sorting them out was still shorter than the time to process a paper return.

Michael: one reason I don't do the extra printing is cost of toner cartridges for the laser printers versus that of the copier, where I must pay a certain amount for a yearly maintenance contract that also includes all supplies. In my year end letter this year, I am offering 'green-conscious' clients the option of taking PDF copies of the return in lieu of paper.

I do have one question for those of you experienced in this. How do you handle attachments that are not computer generated such as the letter from the church to verify contributions that are 50% of AGI? How do I handle attaching 30 pages of capital gain(loss) summaries provided by the client so they do not have to pay me to key in each sale (I can enter see attached on Sch D and only enter the totals)?

http://www.irs.gov/pub/irs-pdf/f8453.pdf

But not for supporting documents.

What there will be, I am sure, is a form for the taxpayer to opt out of electronic filing.

STATE E-File Mandates to reach Taxworks web site showing all states requirements.

It would be interesting to hear from practitioners in other states as to whether there are separate application processes required. Like everyone else on this board, I never know what situations I'll encounter, and it would nice to know in advance if a return will bounce on a technicality.

I suspect New York, with its new rules on registering out-of-state preparers, might require something new. Anyone know?

I will be charged per return for efiling which will make me raise my price on returns to cover...

May I ask approximately How much extra are you guys charging to efile a clients return??

Drake offers E-filing for free

There is a cost whether it be vendor costs, additional staff/sole practitioner time chasing that .... form - there is a cost for those of us who have YET to e-file. Now (for better or worse) we will all need to get into this "system". But there is a cost factor and to say that the paper and toner will offset that cost is non-sense in my opinion. The cost of paper (filing copy), toner and postage is not even a noise factor - no I have not gone paperless.

Let it be known - I do not disagree that for those of us who yet to "comply" there is a point where we do need to "convert" but to be mandated (at ten) is contrary to what I believe in.

MAX - I was told (and yes Kevin I asked on every occasion) that the added billing was between $25-$50 per return. There were some who actually made this a separate charge on every invoice. I was told at almost every turn, that this is a good reason to now increase your billing rates because it IS A COST THAT NEEDS TO BE PASSED ONTO THE CLIENT!

I print a copy of the return for each client, but not for myself. And I keep about four backup sets of my electronic records. I do keep some manual worksheets / records in a filing cabinet, but this comprises less than 1% of the total pages of the tax returns.

I set a flat rate for tax returns and absorb the cost of my tax software as overhead, same as toner and paper. (By the way, I use ProSeries with the unlimited e-filing option). If I find that my overhead becomes too high to yield a decent gross margin, then I will have to consider raising my rates, but so far, so good. I would rather make more money by increasing my client base rather than my fees.

Would also like to address a couple more items ...

Regarding certain comments I read here, it seems that some practioners are e-filing returns before they have received form 8879 from their clients. I humbly refer you to IRS Publication 1345, page 24 (for TY2008). I interpret this to say that form 8879 must be signed by your client before you, as the ERO, are allowed to e-file the return (not sent to you later after you have e-filed). I always have my clients sign this form (and any corresonding state form) when we review their tax returns just prior to e-filing.

Finally, some folks seem worried about mandatory e-filing vis a vis rejected returns, printed church contribution records (just put the total for the church under charitable contributions on Schedule A and retain the printed page in your files), etc. We will probably always have exceptions to e-filing, mandatory or not, such as overseas addresses, forms that are not yet processed electronically, and other causes for rejection.

But there other advantages to e-filing, as well. Hey, I once had a return for a divorced client with a claimed dependent that was rejected because the dependent's SSN had already been used that year - turns out the other parent sold the SSN usage to yet a third, unrelated party. You can be sure I had to file manually to resolve this. But without e-filing, this type of fraud would not have been caught so readily.

Anyway, hope I haven't been too wordy. I enjoy the discussions and sound advice which I often find in these forums. Thanks and have a great day or night!

Is there anyone here who efiles who permits staff to hit the 'send' button to transmit the return? Or do you have staff keep tabs on who has sent their 8879? This is what I mean by cost of time. Now maybe this is because there is only one of me, and one worker and that there are economies of scale with a larger practice.

btw: seems to me some states charge sales tax if the efile fee is separate on the bill(Proseries is free for me).

NOW, I do have to admit that I don't e-file entity returns, because I do relatively few (maybe 50).

So I'm sorry, I don't get why professionals would be so stubborn to wait 20 years to get with the program. Yes, I've heard the arguments before (cost, clients don't trust it, etc) but I don't buy any of the arguments. To me it is just stubborness on the part of the professional.