Discussion:Mandatory Electronic Filing

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Discussion Forum Index --> Business Growth Community --> Mandatory Electronic Filing


Jake (talk|edits) said:

11 June 2010
Not a question - just passing on an item in today's Kip Tax Letter - for tax year 2010 (returns prepared in 2011) the IRS is applying mandatory filing only for those preparers doing 100 or more paid returns. The mandatory requirement for tax year 2011 (returns prepared in 2012) will apply for 10 more more returns. That will at least delay that burden for me until tax year 2011. The IRS is also working on a policy to grant waivers in cases where clients indicate they do not want electronic filing. It will be interesting to see if an exemption is available just because the taxpayer does not want to pay extra for that service.

HRcpa (talk|edits) said:

11 June 2010
Yeah, we have a lot of old-timers who don't want to e-file (including a couple of partners).

Taxea (talk|edits) said:

12 June 2010
You would be doing your clients a big service by efiling their returns so they can get a direct deposit refund within 15 days of filing. Don't understand why you don't want to efile it is so much quicker than collating returns for manual filing. I dont charge the client for efiling. And I don't manually file any return that qualifies for efiling.

Barbie (talk|edits) said:

12 June 2010
I charge extra for e-filing because I have to pay extra to e-file. I have a number of clients who do not trust the internet, have cell phones or even computers. Most of those don't want to e-file don't care about faster refunds because they are applying them to the next year's estimated taxes. Yep. Bunch of old fogies . . . although each year the % of those "converted" inches up a bit.

Crunchynumber (talk|edits) said:

12 June 2010
I love e-filing, much easier than printing, mailing,etc. I feel like charging extra for NOT e-filing! But I also have many clients, even young clients, who are more comfortable paper filing. Plus many of my clients are nonresident aliens and, as of 2009, cannot efile! I just don't see how they are going to require this...

Cotopop (talk|edits) said:

13 June 2010
I don't give my clients an option they either E-file or they find another tax preparer. After explaining the benefits to them nobody has ever turned me down. The aspect of having full control over the return is a big benefit as well as E-Filing extensions.

Anarchrist (talk|edits) said:

13 June 2010
Technically the law currently says "filing" 10 or more returns not "preparing" 10 or more returns. While I'm expecting that to be changed in a technical corrections bill, it hasn't been yet.

If the taxpayer had any sense and the tax preparer was properly tax planning, the taxpayer wouldn't be getting refunds.

Harry Boscoe (talk|edits) said:

13 June 2010
I'm going to prepare my tax return in crayon next year just because I can. I can't figure out how to e-file on my black rotary-dial phone...

RoyDaleOne (talk|edits) said:

13 June 2010
I am still two shorts and a long.

MWPXYZ (talk|edits) said:

14 June 2010
I also wondered about the "filing" 10 or more returns; and also expect a change. But, what if they meant "e-filing" 10 or more returns? If you paperfile all returns, maybe you will be allowed to avoid e-filing?

Waynecpa (talk|edits) said:

14 June 2010
They are going to be going off of the PTIN, so filing would mean filing. One thing I heard last week that made me breathe a little easier is that the preparer won't get in trouble for paper filing a return if that is really what the client wants. However, for the most part, I'm not going to give my clients a choice next year between paper or efile as I have in the past.

Tax Writer (talk|edits) said:

15 June 2010
The IRS is also working on a policy to grant waivers in cases where clients indicate they do not want electronic filing. It will be interesting to see if an exemption is available just because the taxpayer does not want to pay extra for that service.

CA has been mandating e-file for a while now, but the taxpayer can opt-out by signing a form. I'm sure the IRS will give the client a choice to opt out if they choose, but they are really trying to encourage e-file.

I like e-file, and we e-file most returns, but I still paper-file any return with nominee issues, statements, attachements, or anything weird that I want the IRS to see.

FYI-- I confirmed last year during an audit that the IRS did not get the item details for the "other" category on a Schedule C. It was just one lump sum-- $14,000 or something like that-- all the break outs for postage, etc, were all just lumped together. I'm not sure if that was an audit trigger, but I know if the return had gone in on paper the IRS would have all the detail and I wouldn't have to sit there explaining it all to the auditor line-by-line.

The IRS computers just aren't able to process all the detail we need. Here's a question--why doesn't the IRS just find a way to accept a transmitted PDF? All the detail and statements would be there, and the return could be scanned by OCR software, which has been available for over a decade.

I think a big part of the tax gap is simple, old, IRS disfunction.

Tax Writer

Taxalmancer (talk|edits) said:

15 June 2010
I understand how those who already e-file their clients returns may wonder what's the big deal. Just get up to speed and e-file your darn clients' returns!

My state mandates e-filing with voluntary client opt out. Every year, I ask each client whether they want to e-file. To date, not one client wishes me to e-file. Not one. Many are older and those who are overpaid credit their overpayment, for the most part. The speed of the refund is rarely, if ever, a concern. I don't have one client who wishes their refund be direct deposited on their paper-filed return.

Having said this, and given the nature of the clients I deal with, I certainly hope there is an opt out provision.

Death&Taxes (talk|edits) said:

15 June 2010
The value of the efiled return is not the speed of refund, but the Form 9325, the acknowledgment that the return was received and accepted. This is especially valuable for returns where the overpayment is credited, or returns with balances due. I was a late convert to efiling, but before that I can remember that at least once a year a client would receive a notice of non-filing....or worse the dreaded call that "IRS has not cashed my check and it is July 1st." I do not mail client returns; they are sent to the client....and even recommending certified mail would not prevent such happening.

So it comes down to a strong recommendation. BTW, a 77 year old client, a crusty retired newspaper editor, insisted on paper filing, and in my state I had to have him opt out. Talking to him last month, I found out he thought HE HAD TO DO THE EFILING with the return I sent him, and had no faith in his ability on the computer....now that he found out I do it from my office, he is very happy.

Snowbird (talk|edits) said:

15 June 2010
I tell those who want to paper file it is just another opportunity to have an unpleasant time consuming contact with the IRS over what may be an IRS data input or post office error. I quote the IRS statistic of 20% error rate on paper filed returns. I make some unfair disparaging remarks about how concerned do you think the government workers are about accuracy.

Does anyone know the keypunch error rate for the IRS data input? I have seen IRS reports that something like 20% error rate on paper filed versus 1% for e-file, but I suspect that much of the paper file errors are due to math or other errors by the DIY preparers.

Walking Spanish (talk|edits) said:

15 June 2010
I also point out to my clients that paper filed returns sit around in processing centers for some period of time, available to the eyes of many individuals. They may be distrustful of e-filing, but a paper return is hardly a better alternative.

My 1040 practice is heavily skewed toward the older taxpayer - the vast majority are 60+. How may of them e-file with me? All of them. It took about 2 years to get everyone on board, but now they ask for it. They appreciate avoiding the trip to the post office, the prompt deposit of their refund, and the overall ease of an otherwise unpleasant task.

Sadly, there is little discussion of the customer service aspects of this profession on this site. My goal as your tax professional is to (as much as possible) make sure that you are never bothered by avoidable correspondence or questions. Follow up on your delayed refund? Sure, I'll do it. File Form 8453 with your brokerage statements, or 1310 for a decedent? Fax your out-of state-return to the Department of Revenue? Done and done. Good customer service ensures return clients.

E-filing is just another customer service issue and if you aren't offering it, you can be sure that your competition will. I am an absolute technological luddite, but even I could figure this out in 10 minutes. If none of your clients have agreed to this, I respectfully suggest that is hasn't been properly presented to them.

JAD (talk|edits) said:

15 June 2010
It's interesting. Every argument that can be made for or against efiling can also go the other way. Ie, the error rate on keypunching, and possibly triggering an audit, can be balanced by the fact that it appears that the auditor of an efiled return doesn't have the whole picture. Like Tax Writer, I also experienced this last year during an audit of an efiled return (not one I prepared) for a new client. The auditor could not understand the size of the taxpayer's charitable contributions in part because she didn't have the income side of the return.

The issue about the security of paper filed returns can be balanced by what I read almost every week about electronic security holes in the IRS's system.

The acknowledgement from the IRS that the return is filed can be balanced by the notice of delivery from FedEx and the certainty that I am not going to be online after 4/15 to see if that return filed on 4/14 was accepted.

I have never had a client leave or threaten to leave due to me not offering efiling.

Taxalmancer (talk|edits) said:

15 June 2010
For what it is worth, I do offer e-filing. I pay for the Federal and state software every year. If other practitioners enjoy e-filing for the reasons outlined above, that's fantastic. You should do what works well for you and for your clients. I am not thrilled with the notion of e-filing and that sense has been heightened by the feedback I get from clients.

Each year I ask every client the following, "Do you want me to send your tax returns from my computer through the internet to the IRS and xxx state's computers?" The answer I get is almost universal. "Don't you dare."

Like JAD, I've never had a client become disgruntled, much less lost a client, because I didn't e-file their returns (because I am set up to do so). I may, however, lose a client, or more, should I be required to e-file their returns against their wishes.

That I don't like.

Kevinh5 (talk|edits) said:

15 June 2010
you are, in my opinion foolishly, asking the wrong question.

The question you SHOULD be asking is "do you want me to securely transmit your return to the IRS so that it minimizes the possibility of error and speeds up your refund at no extra charge to you?"

I have been e-filing since the first year (1989?) and don't get why some of you are still in the dark ages. Folks, it really is easier once you get over your own thick-skull learning curve.

CathysTaxes (talk|edits) said:

15 June 2010
When I ask a client (especially an older one) if they wish to efile, I inform them that I get immediate notification of the return's receipt and if there are any issues, they can be quickly corrected and efiled. I also inform them that it's their call if they want the refund or payment due to go into/come from their bank account.

WestTXCPA (talk|edits) said:

16 June 2010
Does the mandatory e-file apply to all returns - including employment tax returns ?

DZCPA (talk|edits) said:

16 June 2010
Saves you money on postage when mailing completed return back to client. Saves the client money on postage. Saves money on paper and toner by 33% (no government copy) or 50% if you are paperless. Just do it.

Machster179 (talk|edits) said:

16 June 2010
I try to E-file every return I can, in the first years I was forced into E-filing by my state, I was charging additional for e-filing but now I charge an additional $10.00 per return that isn't e-filed to cover envelopes, paper, postage etc.

E-filing is so easy, fast and convenient for you and your customer to receive their refunds or even when there is a balance due most of my clients still want to e-file and pick a date for auto withdrawal of funds.

Once you start e-filing you will like it!

Laticiaw (talk|edits) said:

17 June 2010
i wish my boss would efile more. but he is under the mistaken assumption that the Irs gets every bit of supporting information on the return. Of course I also work for an employer that didn't move to a windows based tax software until 2000 just before I started...I have had to do a lot of work to get him to where he is today...we just started networking our office computers in January...and I managed to talk him into getting a scanner...finally.

Anyway, efiling in my opinion is a lot more efficient plus it gives me peace of mind that IRS has it and has accepted it...so if there is any CP2000 it will not be from any initial return issues like wrong social security numbers.

TTMM (talk|edits) said:

17 June 2010
Westtxcpa, use the magic yellow box.

Just individual returns.

DZCPA (talk|edits) said:

17 June 2010
The IRS does not get the detail information from statements with the E filed returns. Only what appears on the actual forms is sent to them. The IRS also does not look at those statement details on the mailed in returns unless looked over audit purposes.

LJACPA (talk|edits) said:

17 June 2010
This is a bit off topic here but in direct response to Walking Spanish. As you have no profile it is impossible to determine if your 'value-added services' are justified by the fees you are able to bill. Many past discussions on billing and fees are based on locale in big part. I am so struggling right now as I have always gone above and beyond,'spoiled' my clients and never cease to be amazed that so many believe that the fee for tax preparation includes year-round consultations, tax planning and projections, responding to notices (which seem to be more numerous than I've seen in 23 years), etc. You must be well paid to so freely gives so many services that if I don't start billing for I will be closing my practice. Sorry for the rant, I've worked so hard for so long and it saddens me to not be able to continue to justify those 'free services'.

CathysTaxes (talk|edits) said:

17 June 2010
LJA, my husband had started this business and he spoiled his clients as well (gave them his pager and cell phone). I can't tell you how many goofy after hours calls we got.

I check the caller ID. All client calls have to come on my business line. If they try to get me after hours by calling my personal line, I ignore the call. I do not answer the phone after 5 or on weekends (unless I'm expecting a specific client to call, then I will). I do not give any of them my cell phone.

I've gotten calls on holidays. It's ridiculous.

DZCPA (talk|edits) said:

17 June 2010
LJACPA, Walking Spanish is right on. I suggest you buy an existing highly profitable firm from a retiring CPA or EA. This will help you see how its done and put you in the $$.

Walking Spanish (talk|edits) said:

17 June 2010
Perhaps I was unclear in my previous post. I don't consider these "value-added' or "free" services. They are an integral part of the completion of the job. (Wasn't it Snoopy who said "no job's complete until the paperwork is done"?) Perhaps it's the combination of e-filing and attention to detail or maybe just dumb luck, but I get relatively few CP-2000's; perhaps one or two annually out of 225 returns. It's just as well, as I hate answering correspondence in the summer.

My fees are very satisfactory to me. I'm sorry that you are struggling. Perhaps there are others on this site with suggestions, but I'll stand by my assertion that good customer service builds quality practices.

Taxsmith (talk|edits) said:

15 December 2011
As I understand it, the key to mandatory efiling is whether or not you file 10 or more returns and not whether you prepare 10 or more returns. The definition of filing the act of transmitting the returns directly to the IRS either via electronic means or mail so if your clients file their own returns and you don't participate in electronic filing, you will not have to participate in the mandatory efiling as you don't meet the definition of a specified tax preparer.

Hgco (talk|edits) said:

17 December 2011
If your name appears as preparer on 10 or more (basically 11+) federal income tax returns, you are required to e-file.

If you did not apply for and pay last years PTIN fee, IRS will be hitting you up for this year and last year ($64.25 + 64.25).

Next year the PTIN fee drops to the 'bargain' price of $63.00.

Info as told per recent fed/state e-filing seminar attended.

Anarchrist (talk|edits) said:

17 December 2011
The law says file not prepare. Taxsmith is correct.

WCMirtes (talk|edits) said:

17 December 2011
The PTIN renewal fee for 2012 is $63 not $64.25.

Kerryfreemanea (talk|edits) said:

19 December 2011
Sorry, however all tax preparers that prepare 10 or more returns are required to e-file with some short term execptions for 2012. The client taxpayer can opt out however that return can not be mailed (as some would do as a service for the client)by the preparer.

Review Fac sheet on the IRS web site.

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