E-Filing Tax Returns Shaping the Future
Eric L. Hayes, CPA, CVA
The e-file program was established more than 15 years ago.Since that time, many improvements have greatly enhanced the appeal of this service. More and more states are requiring tax preparers to e-file returns to cut down on data entry and labor costs. More taxpayers are aware of the benefits of e-filing and are requesting this service from their return preparers. E-filing ensures that returns will not be lost in the mail or, in most cases, experience processing delays.
Application Process & Set Up
To start efiling, you need to fill out and submit Form 8633, the application to participate in the IRS E-File program. You must also pass a suitability background check (which involves a credit check and a review of whether or not the preparer has filed all his/her required returns – Note this is an annual review.) After IRS approval, set up your tax service to include e-file services (most well-known tax preparation software packages make this a straight-forward process) and then you can start e-filing.
Data Input
E-filing creates the need for a limited amount of additional data input, but eliminates the need for production of multiple hard copies. For most returns, the only forms that require additional input are Forms W-2, W-2G & 1099R.
All other data of other return information is unchanged from that of traditional filing. Your tax software’s return diagnostics will catch most of the problems that will cause the return to be rejected.
Processing Options
Paper e-filing requires the taxpayer to manually sign Form 8453 and have the tax preparer mail to the IRS after the return is accepted.
The Practitioner PIN method allows taxpayers who use a tax preparer to file electronically using Form 8879, which does not have to be mailed into the IRS.
The Self-Select PIN method is primarily for taxpayers who file their returns electronically on their own. Practitioners with unusual forms or other aberrations should refer to Publication 1354A before attempting to file the return electronically.Publication 1354 also provides e-file guidance.
Printing Copies of the Returns
No filing copies need to be mailed to governmental agencies.A taxpayer copy and file copy are usually the only copies that need to be printed. Forms 8453 or 8879 (E-file authorization) will be printed as part of the taxpayer and file copies. Either Form 8453 or 8879 must be signed and returned to the preparer before the returns can be transmitted.
Transmission of Returns
Taxpayers must review the return prior to transmission. The returns are sent to the intermediary electronic filer (a function of the tax preparation software) who submits them to the governmental agencies. Intermediary acknowledges receipt of the returns and notifies the preparer when the return is forwarded to the governmental agencies.
Acceptance or rejection of the return is usually within 48 hours of submission. A return that is rejected will require the preparer to correct the problem and resubmit.
Most Common Reasons Returns are Rejected:
• Federal EIN entered for a W-2, W-2G or 1099R does not match employer name in IRS records.
• Taxpayer or spouse name and social security number do not match.
• Dependent name and social security number do not match.
• Dependent’s social security number has already been used on another return.
• Preparer input errors.
Once a rejected return has been corrected by the preparer, any change in the tax liability requires new taxpayer authorizations forms.
Completion
Notify the client that the return has been accepted (usually an acceptance letter can be generated from the tax preparation software).
For paper e-filing, Form 8453 with any attachments (forms that the IRS currently doesn’t accept electronically) must be mailed to the IRS after the preparer is notified that the return has been accepted.
Conclusion
E-filing has come a long way from its inception and the IRS has worked with tax professionals to make the process as easy as possible. More and more taxpayers are electing to have their returns filed electronically to speed up refunds or to ensure that their return doesn’t get lost in the mail. Consider offering this service to your clients … especially if they’ve already expressed an interest in e-filing.
Eric L. Hayes, CPA, CVA, is a principal of Seely Mullins & Associates PC. He can be reached at eric@seely mullins.com.
AZ CPA – January 2006
This content has not yet been Rated.
To Rate content, please Login.
