E-filing mandate

[Nashville]

One Refusal

While in NC last week I had dinner with a distinguished and knowledgeable CPA friend. He told me he does not do electronic filing for his clients and is considering getting out of the tax business if it becomes necessary next year.

This is not someone who is computer-ignorant, or someone too backward to learn. On the contrary, an amazingly sharp guy. He has other sources of income, and I would think his refusal is based on a fear of electronic proliferation of client data, or electronic storage of bank account numbers and related information.

If his clientele is not allowed to opt out, our profession (and the IRS) will lose someone of value who produces complicated returns virtually error-free. (He does use software, just no e-file).

[Bees Knees]

Obviously if the system cannot support e-filing for certain returns, there has to be a paper option. As for opting out, I would assume that could only be done at the client level. Unless the client says no, then the preparer is forced to e-file.

I remember these very same issues being discussed when Minnesota forced e-filing on us several years ago. There was talk of some preparers having all of their clients opt out to avoid having to e-file. But now that we are doing it, I know of no preparer that exists in Minnesota today who is not e-filing most if not all returns that can be e-filed. Once the preparer learns how to e-file, the controversy seems to go away.

This is all very reminiscent to the computer verses hand prepared return issue we had back in the late 1980s. The old timers refused to use a computer. Now, there is virtually nobody left that does not recognize the importance of using a computer to prepare a return, and anyone left that continues to insist on doing everything by hand is an endangered species.

[Uncle Sam]

E-File Mandate

Is there an opt-out provision?
I'm from NY.
I have a few Florida clients who know nothing about e-file.
They would prefer I mail them paper returns, they sign and mail in directly.
Besides, they send me their stuff extremely late - so e-filing for them would be impractical because of the time sensitivity of rushing 8879's by deadline date.

[erchess]

Unknown Events

We are discussing events which are unknown and unknowable since they take place on and after one year from the upcoming 1/1. Now given that, is it even clear whether it will be possible to efile ALL current year Federal returns? Or will a few returns continue to be done on paper?

To totally eliminate paper we would need to be able to efile not only every single Form but in the case of forms such as Sch C where a taxpayer could have any number of them, it would have to be possible to efile any number of them. Furthermore it would have to be possible to efile a return where a social security number has already been used for the same purpose or a name and social security number do not match SSA records.

Personally I would like to see efiling a return be just like faxing something to someone in that literally any combination of text and or graphics will go. But that would defeat the purpose of efiling in the eyes of the government, which is to improve accuracy.

[Snaggletooth]

The Difference

is paramount to e-filing everything versus keeping in place what we already have. If there is ANY choice between a paper return and a e-filed return, then we are reduced to exactly the status quo. Namely, the client and preparer decide how they're going to file.

If this choice is left in place, then there is no point in having the new legislation.

2-3 years ago, Alabama mandated electronic filing for all in-state preparers, as a few other states. But they allowed for exceptions. One of the exceptions was that if the taxpayer did not wish to e-file. The result for me? All of my AL clients who wanted e-file continued to do so, and all AL clients who did NOT want e-file continued to file a paper return. By allowing this exception, there was really no point in Alabama issuing the mandate.

[Bees Knees]

The new 2009 version of TheTaxBook is out. Mandatory e-filing is covered in Tab 1. TheTaxBook makes the following author’s comment on page 1-18:

Author’s Comment: Some commentators have noted that the law
only applies to preparers who both prepare and file returns for clients.
They say a preparer who signs the return, but has the client mail the
return to the IRS, is not subject to the e-filing rules because the preparer
is not actually “filing” the return if the client mails it. However, it
should be noted that the Joint Committee technical explanation of the
law makes no mention that this rule only applies to those who both
prepare and mail the return for the client. The terms “mail” and “file”
are not the same. For example, the IRS instructions on where to file a
return say the following: “These where to file addresses are to be used
only by tax professionals filing individual federal tax returns for their
clients...” The addresses to be used apply regardless of whether the tax
professional mails the return for the client, or the tax professional has
the client mail the return. Under both situations, the tax professional is
said to be “filing” the return for the client regardless of who actually
brings the envelope to the post office for mailing.

It will be interesting to see how IRS interprets this rule.