Mail Problems

[ATSMAN]

I charge more if they paper file when e-file is available because it costs me more in toner, paper and envelopes. So far only a handful of takers and most are the paranoid type who still believe that a human actually looks at their return and makes sure it is all ok? I have one crazy lady who actually inserts her own sweet cover letter with her return when she mails it. Never saw what her cover letter says??

[TaxGuyBill]

I am always impressed how some participants on these boards take personal umbrage at comments made. Guess it might now be appropriate for me to push that "abrasive" button for a bit:

FOR THE RECORD: It is my understanding that the IRS has, among other things done to tax preparers in recent years, placed a requirement that any preparer who prepares more than ten returns must efile all tax returns. In absence of doing such, the preparer must "justify" to the IRS his/her reason for not following that protocol. Hence, enter Forms 8944 and/or 8948. It is also my understanding that merely stating (perhaps erroneously?) that "the taxpayer chose to file this return on paper" cannot be routinely used as a convenient excuse for all returns....and could be subject to reviewable proof provided by the tax preparer. A client statement of some sort may even be required? (I have not yet had to cross that particular bridge.)

If "cite" (non-fragrant or otherwise...) is still a banned phrase here, the following "information" is hereby offered:

INFORMATION ITEM #1: Starting January 1, 2012, any tax return preparer who anticipates preparing and filing 11 or more Forms 1040, 1040A, 1040EZ and 1041 during a calendar year must use IRS e-file (unless the preparer or a particular return is administratively exempt from the e-file requirement or the return is filed by a preparer with an approved hardship waiver).

INFORMATION ITEM #2: Even if you are an authorized e-file provider, clients for whom you prepare one of the returns identified above may choose to file on paper if the return will be submitted to the IRS by the taxpayer. As described in Rev. Proc. 2011-25, tax return preparers in this situation should obtain and keep a signed and dated statement from the client. (See http://www.irs.gov/pub/irs-drop/rp-11-25.pdf , specifically page 5.)

If there are legitimate religious reasons against not paper filing, that is fine. (Also another bridge I have not crossed.)

For better or for worse, that is my understanding of "the rules." Whatever someone else chooses to do has absolutely zilch to do with "how I run my shop," although I will admit that I do my very best to "run my shop" in full compliance with IRS regulations in place. As for clients erasing an "electronic trail to their finances" by not efiling, I find that reasoning borderline ludicrous. I assume someone living in a cave without credit cards, bank accounts, social security records, medical records, and other stuff could perhaps live incognito without any electronic trails. Of course, this same person who paper filed would also have to assume nothing was ever entered into the nationwide IRS computers. As they say on TV.... REALLY?!?

Regarding Coach Cutcliffe, from all I've seen he is a class act and generally respected by all. The NCAA needs more coaches like him.

Peace.

FE

It's not an IRS requirement, it's directly in the Internal Revenue Code from Congress.


IRC 6011(e)(3):

(3) Special rule for tax return preparers
(A) In general
The Secretary shall require than [1] any individual income tax return prepared by a tax return preparer be filed on magnetic media if—
(i) such return is filed by such tax return preparer, and
(ii) such tax return preparer is a specified tax return preparer for the calendar year during which such return is filed.
(B) Specified tax return preparer
For purposes of this paragraph, the term “specified tax return preparer” means, with respect to any calendar year, any tax return preparer unless such preparer reasonably expects to file 10 or fewer individual income tax returns during such calendar year.
(C) Individual income tax return
For purposes of this paragraph, the term “individual income tax return” means any return of the tax imposed by subtitle A on individuals, estates, or trusts.

http://www.law.cornell.edu/uscode/text/26/6011#e_3

http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-E-file-Requirements-for-Specified-Tax-Return-Preparers-%28sometimes-referred-to-as-the-e-file-mandate%29

Circular 230 10.51(a)(16):

(a) Incompetence and disreputable conduct. Incompetence and disreputable conduct for which a practitioner may be sanctioned under §10.50 includes, but is not limited to ... (16) Willfully failing to file on magnetic or other electronic media a tax return prepared by the practitioner when the practitioner is required to do so by the Federal tax laws unless the failure is due to reasonable cause and not due to willful neglect.

http://www.law.cornell.edu/cfr/text/31/10.51

[JohnH]

I am always impressed how some participants on these boards take personal umbrage at comments made. Guess it might now be appropriate for me to push that "abrasive" button for a bit:

FOR THE RECORD: It is my understanding that the IRS has, among other things done to tax preparers in recent years, placed a requirement that any preparer who prepares more than ten returns must efile all tax returns. In absence of doing such, the preparer must "justify" to the IRS his/her reason for not following that protocol. Hence, enter Forms 8944 and/or 8948. It is also my understanding that merely stating (perhaps erroneously?) that "the taxpayer chose to file this return on paper" cannot be routinely used as a convenient excuse for all returns....and could be subject to reviewable proof provided by the tax preparer. A client statement of some sort may even be required? (I have not yet had to cross that particular bridge.)

If "cite" (non-fragrant or otherwise...) is still a banned phrase here, the following "information" is hereby offered:

INFORMATION ITEM #1: Starting January 1, 2012, any tax return preparer who anticipates preparing and filing 11 or more Forms 1040, 1040A, 1040EZ and 1041 during a calendar year must use IRS e-file (unless the preparer or a particular return is administratively exempt from the e-file requirement or the return is filed by a preparer with an approved hardship waiver).

INFORMATION ITEM #2: Even if you are an authorized e-file provider, clients for whom you prepare one of the returns identified above may choose to file on paper if the return will be submitted to the IRS by the taxpayer. As described in Rev. Proc. 2011-25, tax return preparers in this situation should obtain and keep a signed and dated statement from the client. (See http://www.irs.gov/pub/irs-drop/rp-11-25.pdf , specifically page 5.)

If there are legitimate religious reasons against not paper filing, that is fine. (Also another bridge I have not crossed.)

For better or for worse, that is my understanding of "the rules." Whatever someone else chooses to do has absolutely zilch to do with "how I run my shop," although I will admit that I do my very best to "run my shop" in full compliance with IRS regulations in place. As for clients erasing an "electronic trail to their finances" by not efiling, I find that reasoning borderline ludicrous. I assume someone living in a cave without credit cards, bank accounts, social security records, medical records, and other stuff could perhaps live incognito without any electronic trails. Of course, this same person who paper filed would also have to assume nothing was ever entered into the nationwide IRS computers. As they say on TV.... REALLY?!?

Regarding Coach Cutcliffe, from all I've seen he is a class act and generally respected by all. The NCAA needs more coaches like him.

Peace.

FE

Just for the record, no umbrage taken here. Judging from the reactions I sometimes encounter when I mention paper filing, I often get the impression that the traffic is decidedly in the opposite direction.

Now on to the issue of e-flinging vs the Hardship Exception for paper filing, I think you have it correct on all counts. I agree that it would be very risky to consistently paper file by relying upon the "client preference" option (unless of course each client independently expressed a desire to opt out). But obtaining an IRS waiver makes all the potential problems go away and allows one to still run their shop in full compliance with the rules. I found it to be a very simple process and it has served my purposes well. As long as they continue to approve my requests, I'll keep working. If they ever deny one, I'll still comply by either jumping into the e-flinging fray or by retiring. As things stand, I have another year to make that decision, which is just fine with me.

[FEDUKE404]

Necessary verbiage for NOT efiling

This is consistent with what I recall....taken from link cited (!) previously by TaxGuyBill :


16. Can my clients choose not to e-file?

Yes. Even if you are a specified tax return preparer, your clients may independently choose to file on paper. Preparers should document each client’s choice to file in paper format and keep a signed copy of the statement on file. See FAQ 17 below for the statement. Do not send the statement to the IRS or attach it to the client’s tax return. Instead, specified tax return preparers should attach Form 8948, Preparer Explanation for Not Filing Electronically, to your client’s paper return and check box 1. Include your PTIN on each tax return where requested. If your clients are filing a joint return, only one spouse’s signature is necessary on the choice statement.

17. What is the recommended language for documenting a taxpayer’s choice to file on paper?

My tax return preparer [INSERT PREPARER’S NAME] has informed me that [INSERT s/he] may be required to electronically file my [INSERT TAX YEAR] individual income tax return [INSERT TYPE OF RETURN: Form 1040, Form 1040A, Form 1040EZ, Form 1041, Form 990-T] if [INSERT s/he] files it with the IRS on my behalf (e.g., submits it by mail to the IRS). I understand that electronic filing may provide a number of benefits to taxpayers, including an acknowledgment that the IRS received the returns, a reduced chance of errors in processing the returns, and faster refunds. I do not want to have my return electronically filed, and I choose to file my return on paper forms. I will mail or otherwise submit my paper return to the IRS myself. My preparer will not file or otherwise mail or submit my paper return to the IRS.


(All highlights and colors are my own.)

FE

[JohnH]

That would be a lot to prepare and maintain. If I were e-flinging and a client wanted to paper file, I'd probably charge them extra just for preparing that statement and keeping up with it for 3 years.

But getting the waiver through proper channels renders all that irrelevant and takes the decision out of the client's hands. I simply attach the form with my waiver number to the return, give it to the client, and I'm done. The only decision they need to make is whether to go somewhere else if they DON'T want to accept responsibility for filing their return via paper. I'm OK with whatever they choose to do.

[TaxGuyBill]

If "cite" (non-fragrant or otherwise...) is still a banned phrase here, the following "information" is hereby offered:

This is consistent with what I recall....taken from link cited (!) previously by TaxGuyBill :

FEDUKE404 - I'm new here. Are "cites" looked down upon here? If so, why?

[Snaggletooth]

New Member

I'm new here.

Yes, and your new involvement has come like a breath of fresh air. We appreciate your well-informed knowledge and willingness to share with the rest of us.

Cites? No reason to come to any conclusion about us as a group as we are all individuals. As a matter of fact too many of us (myself included) tend to shoot from the hip without any authoritative substantiation. Others will give cites regularly and will hardly post without them.

Thanks for your continued involvement.

[FEDUKE404]

Citing those cites

FEDUKE404 - I'm new here. Are "cites" looked down upon here? If so, why?

Welcome, TaxGuyBill.

My tongue-in-cheek "reference" to cites is related to some issues from a time in the recent TTB past.

IIRC, the scenario went something along the lines of a poster gave specific (IRS link and/or Code references) cites to support a position which.....was not being upheld by certain others. And the dissenting poster's response to said cites was something along the lines of "I don't need no steenking cites." O-----K------

That scenario was not unlike what is currently going on here: Is efiling truly required, what about a properly formatted client statement opting out, or what IS a hardship sufficient to negate stated IRS mandatory efiling requirements?? A comparable (theoretical) conclusion would therefore be "I don't care what you cite, I'm just NOT gonna efile!!"

Overall I guess all of the hoopla relates to the issue of "how you run your shop" as raised earlier.

This board can be the source of a wealth of useful tax information. There is much experience here to draw upon. OTOH, there are some posts which - upon careful review - just will not hold much water. You will soon learn which posters' opinions/contributions rise above some of the noise that can frequently occur here.

I'm outta here for a while. I do have a bit of work to do, even though I doubt if I will file any returns (electronically!) until mid-February at the earliest.

FE

[Bees Knees]

A little known fact

It's not an IRS requirement, it's directly in the Internal Revenue Code from Congress.


IRC 6011(e)(3):

[i](3) Special rule for tax return preparers
(A) In general
The Secretary shall require than [1] any individual income tax return prepared by a tax return preparer be filed on magnetic media if—
(i) such return is filed by such tax return preparer, and
(ii) such tax return preparer is a specified tax return preparer for the calendar year during which such return is filed.
(B) Specified tax return preparer
For purposes of this paragraph, the term “specified tax return preparer” means, with respect to any calendar year, any tax return preparer unless such preparer reasonably expects to file 10 or fewer individual income tax returns during such calendar year.

Not to throw a monkey wrench into this mess, but actually, the way the code reads and the info on the IRS website, technically none of us have to e-file a return for a client if we ONLY prepare the return and not file it.

Look again at the code above.

Now look at this from the IRS website:

http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-E-file-Requirements-for-Specified-Tax-Return-Preparers-(sometimes-referred-to-as-the-e-file-mandate)

7. When is an income tax return considered filed by a tax return preparer?
For purposes of this electronic filling requirement, a return is considered filed by a tax return preparer or specified tax return preparer if the preparer or any member, employee, or agent of the preparer or the preparer’s firm submits the tax return to the IRS on the taxpayer’s behalf, either electronically or in non-electronic (paper) form. For example, the act of submission includes the preparer or a member of the preparer’s firm dropping the return in the mailbox for the taxpayer. Acts such as providing filing or delivery instructions, an addressed envelope, postage estimates, stamps, or similar acts designed to assist the taxpayer in the taxpayer’s efforts to correctly mail or otherwise deliver an individual income tax return to the IRS do not constitute filing by the tax return preparer or specified tax return preparer as long as the taxpayer actually mails or otherwise delivers the paper individual income tax return to the IRS.

You will notice that the act of preparing returns ONLY and not filing them for the client falls outside of this e-file requirement.

Thus, no waivers needed.
No e-file requirement.

Personally, I would suggest you e-file the returns. But technically, none of us are required to unless we try to mail the return to the IRS for the client, which I suspect none of us do.

[JohnH]

Bees, you are right on target. I am almost certain that this is why my waivers are approved each time, because I make it crystal clear in my waiver request that I PREPARE returns for my clients, who in turn FILE their returns by mail. And this is confirmed by the fact that even though I tell IRS how many returns I prepare (which is well over the magic number of 10), their approval letter actually states that I am not subject to the e-file mandate. But they are also kind enough to go ahead and assign me a waiver number, so all the bases are covered.

If anyone has a problem with this interpretation, they need look no further than the instructions for Form 8944:

"When a Return is Considered Filed by Preparer
For the e-file requirement, a return is considered filed by a preparer if the preparer or any member, employee, or agent of the preparer or the preparer's firm submits the tax return to the IRS on the taxpayer's behalf, either electronically or in paper format. For example, the act of submitting includes having the preparer or a member of the preparer's firm drop the return in a mailbox for the taxpayer. Acts such as providing filing or delivery instructions, an addressed envelope, postage estimates, stamps, or similar acts designed to assist the taxpayer in the taxpayer's efforts to correctly mail or otherwise deliver a paper return to the IRS do not constitute filing by the preparer as long as the taxpayer actually mails or otherwise delivers the return to the IRS."

PREPARING a return and FILING a return are two separate and distinct processes. The definition turns on who actually "submits the return to the IRS". Prior to the e-flinging mandate, I would occasionally have the client sign the return and I'd drop it in the mail for them. Thanks to tips contained in a couple of articles by Ed Zollars, I stopped doing that for my clients when it became obvious that IRS was going to get obsessive about this little detail. I still function as a return PREPARER. My clients are the ones responsible for FILING their returns - I don't intend to accept that responsibility unless I'm forced to do so.

[TaxGuyBill]

You will notice that the act of preparing returns ONLY and not filing them for the client falls outside of this e-file requirement.

Thus, no waivers needed.
No e-file requirement.

Personally, I would suggest you e-file the returns. But technically, none of us are required to unless we try to mail the return to the IRS for the client, which I suspect none of us do.

Thanks, great catch. That is REALLY interesting and good to know. I looked it up, and that IRS page is missing part of the information. It's in Regulation 301.6011-7(a)(4). Here is the missing part:

An individual income tax return will not be considered to be filed, as defined in paragraph (a)(4)(i) of this section, by a tax return preparer or specified tax return preparer if the tax return preparer or specified tax return preparer who prepared the return obtains, on or prior to the date the individual income tax return is filed, a hand-signed and dated statement from the taxpayer (by either spouse if a joint return) that states the taxpayer chooses to file the individual income tax return in paper format, and that the taxpayer, and not the preparer, will submit the paper individual income tax return to the IRS. The IRS may provide guidance through forms, instructions or other appropriate guidance regarding how tax return preparers and specified tax return preparers can document a taxpayer's choice to file an individual income tax return in paper format.

http://www.law.cornell.edu/cfr/text/26/301.6011-7#a_4

So you are right, BUT we need a signed paper from the taxpayer indicating that they are choosing to file by paper and will be mailing it themselves.
I think the IRS also wants Form 8948 mailed with it.

http://www.irs.gov/pub/irs-pdf/f8948.pdf

[FEDUKE404]

On further review

Not to throw a monkey wrench into this mess, but actually, the way the code reads and the info on the IRS website, technically none of us have to e-file a return for a client if we ONLY prepare the return and not file it.

Look again at the code above.

Now look at this from the IRS website:

http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-E-file-Requirements-for-Specified-Tax-Return-Preparers-(sometimes-referred-to-as-the-e-file-mandate)

You will notice that the act of preparing returns ONLY and not filing them for the client falls outside of this e-file requirement.

Thus, no waivers needed.
No e-file requirement.

Personally, I would suggest you e-file the returns. But technically, none of us are required to unless we try to mail the return to the IRS for the client, which I suspect none of us do.

MOST interesting.

Reminds me of the past IRS verbiage for the SEHI - "policy must be in the name of the business" for a Schedule C individual, and the later hoopla for possible inclusion of owner's Medicare B premiums.

Soooo.....if I am reading this newly posted information correctly, a person can "prepare" all of the tax returns he/she wishes and then give each client a paper return to sign/mail, aka "filing." No harm, no foul....go your merry way and completely ignore that fancy modern thing known as efiling ??? (Rotary phones and dial-up internet access remain optional.) That would mean the "preparer" could also not have to waste any time dealing with Forms 8944 and/or 8948, I assume. Things could get a bit sticky if the "preparer" somehow metamorphoses into a "filer" and either efiles a client return or drops a client return into the mailbox?????

Of course, from a realistic viewpoint, said preparer (albeit NOT a "filer") will likely incur significant increases in business costs due to printing/ink/postage/time (and dealing with phone calls/letters to see "if/when a tax return was received") and may well lose a client or two who requests (nay, demands?) efiling. Of course, those preparer costs could be significantly reduced/offset if tax software was not used and all returns were done by hand....I THINK I even recall how to run a "check tape."

Live and learn.

Carry on.

FE

[JohnH]

I didn't follow that route, since I obtained waivers (as has been stated before). I get my waiver number by telling iRS the truth - if they want to change the rules they can do so, since they write them in the first place. Then there's no need to fool around with getting signed statements from the clients.

But I also haven't noticed any of the horrendous additional costs associated with paper filling, toner, etc since Office Depot offers pretty cheap prices on that stuff. I haven't lost any clients due to my Neanderthalic practices, and in fact I usually have to turn away a few each year (even after I tell them I'm not an e-flinger). Now what did I do with that stack of carbon paper?

So my take on the whole thing is still the same - being a data entry clerk for the IRS isn't in my job description, nor do I aspire to that role. I'll prepare the return and continue to leave the filing task to the client, where it belongs.

To each his own.

[ATSMAN]

Get your Forever Stamps before Jan 26

Get your Forever stamps now before price increase!

[JON]

1041

with a fiscal year ending after 6/30 bedore 12/31 has to be paper filed. That is the only mailed return I did for the IRS that was mailed. Could someone tell me why 1041s fiscal after 6/30 cannot be filed electronically??? Silly or what. Did use certified mail.