Free E-Filing

In its continuing move to encourage more taxpayers to file their tax returns electronically, IRS has announced that it will allow that to be done for free rather than require people to pay service providers or buy special software for this feature. I have no idea how many of the 78 million people who are supposedly eligible will take advantage of this free capability.

This is as good a time as any to refresh and update everyone on my opinions of electronic tax return filing. IRS is still strongly encouraging tax practitioners to file their clients' tax returns electronically in order to save IRS processing time. Tax software providers, including the ones I use (Lacerte and ATX), are increasing the e-filing features built into their programs. I am still refusing to partake of this for any of my clients.

Again, it has nothing to do with any fear of new technology. I have always been a very early adopter in the world of high tech. I refuse to have my clients electronically file their tax returns because doing so would increase the chances of their being selected for audits and causing other problems with IRS processing. The format required for electronically filing tax returns does not allow the detailed explanations and heavy documentation that I like to include with all of the tax returns that I prepare. I have been very good at anticipating those items on tax returns that could possibly raise IRS concerns. I then add plenty of additional info to the return to explain to IRS personnel why the numbers are as they are and why they are legitimate. IRS has always accepted those additional explanations and left my clients alone. With e-filing, I wouldn't be able to do that, putting my clients at additional risk of IRS hassles.

The question comes up as to whether or not I feel threatened by this IRS plan to allow taxpayers to bypass us professional tax preparers. Not one bit. This is no more of a threat to my business than the long time availability of do it yourself tax prep software, such as TurboTax. It is the classic garbage in, garbage out. The tax returns I work on require quite a bit of skill and knowledge as to where and how to enter information.

Tax preparer outfits that are no more than form fillers, with no intelligence or creative input required, will and should suffer from this new IRS feature. I don't own any stock in H & R Block, but my guess is that this ability for many of its clients to get the same service for free from IRS won't be a positive development for that company.

While I don't expect to actually use e-filing for my clients, I may have to sign up with IRS for an e-filing account in order to have access to some of the new web-based features that IRS is going to be unveiling soon. During the IRS webcast a few days ago, the IRS representatives described some improvements to their systems, including allowing us to access taxpayer accounts, obtain new ID numbers and trace payments over the Internet. However, to force those of us who refuse to participate in the e-filing program, the new features will only be available to those practitioners who are signed up as e-filers. I still have to see the details of this and whether it is an empty threat or not before signing up for an account.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 1/16/2003 01:49:00 PM Send this post: