More Accounting Tomorrow Posts

Are you a first-time e-filer?

January 24, 2011

With the 2010 e-file mandate just around the corner, I am amazed at the number of CPAs who will be filing electronically for the first time. I know of a few firms in my area who admit to never having e-filed—and probably still wouldn’t if not mandatory. Unfortunately, this year will be a tough one for these firms. Even though the process for e-filing itself is fairly simple, the change in routine is the tough part. And don’t we as a collective group hate change?

What really amazes me though, is the overall lack of participation in e-filing. A good portion of the industry as a whole still does not e-file. You would think that the e-file process was just introduced last year, when it’s actually been around for at least a decade. And yet there are still firms that have never done it. I ask respectfully: what’s up with that?

The lack of enthusiasm around e-filing is just one indication of the profession’s unwillingness to embrace technology. But I think it’s more than unwillingness; it seems to be more of a knock-down-drag-out fight. Many accounting professionals fight it tooth and nail—standing by the notion that they’ve always gotten along fine without it and will continue to do so. Of course, with e-filing mandatory this tax season, these firms will have to jump in head first. And, though they may hate it at first, my prediction is that they will find the convenience and ease of use to be refreshing.

I myself am in the process of transitioning a legacy firm. My partner had a few clients that e-filed, but it was less then 20 percent. With the new law in place, we proactively moved our clients to e-file last year. My partner was concerned that his clients would be resistant and he didn’t want to force them. But guess what? The “resistance” was comprised of less than a handful of clients, while the rest of the group was delighted. Imagine that.

Going into the current tax season, we feel good from an e-file standpoint. The majority of our clients will accept the mandate for e-filing. However, we still expect a few to be resistant…like my partner’s client of 35 years who is insisting to “paper” file. My stance? Clients must follow our process, or they should find another firm. My partner thinks I’m being harsh, but I ultimately have the client’s best interest in mind. E-filing is fast, convenient, secure and doesn’t require wasting paper. Not to mention, as the trusted advisor to our clients, it’s our responsibility to lead them down the right path. E-filing is the right path. Lead your clients and they will follow. Those that don’t probably don’t represent the client you want on board anyway. Trust me on this one.

Update: Jody responds to the comments here.

Jody L. Padar, CPA, MST, is a Certified Public Accountant experienced with Complex Federal & State Income Tax Compliance for Business & Individuals. Jody is an adjunct professor at Oakton Community College, where she teaches Taxation and QuickBooks Courses. She is part of Intuit Trainer Writer Network and speaks nationally on various Technologies and Taxation. She can be reached at

Comments (22)
Our firm has been e-filing for years and while the first year was a bit hard it was way easier than we expected. Our clients love e-filing but some clients neglect to send their filed forms back timely and we have to chase them down. I reccomend having a procedure to track this so you are not scrambling at the deadline. I agree with Jody that you will be surprised at how many clients embrace the e-filing.
Posted by mstrickernew | Saturday, January 29 2011 at 7:23PM ET
I actually used to e-file a long time ago and found it to be a frustrating and time-consuming process. It thus defeats the object of e-filing. The addition of further steps in the process exacerbates the problem. The systems inefficiency in applying for a number that I have personally experienced generates alarm bells. As the rules get more and more severe, and they will (e.g. eventually if you take a tax position that the IRS does not like), they could eventually withhold or withdraw these numbers. And who thinks the IRS can resist the temptation to generate more and more rules?
The security problem does not revolve around storing data in IRS files. It has to to with in-transit issues and the possible disruption and vulnerability of the system on which the entire nation's revenues depend including paying payroll tax payments. The electric grid's history of unintentional outages and resultant disruption (and deliberate manipulation (Enron)) illustrate the point. One nation that I will not name has been reported as having software-worms inside the grid.
Avoiding Federal E-filing will be difficult because the States are now starting to insist on E-filing, but requiring Federal E-file approval as a prerequisite, thereby leaving practitioners no choice but to obtain approval and filing electronically with the States. Therefore the tail is wagging the dog. If anyone thinks that the IRS does not intend to force us all eventually in the e-file direction, think again. They will not be able to resist.
Posted by Jonesey | Thursday, January 27 2011 at 10:27PM ET
Dear Fellow Professionals and resistors (for obvious wrong reasons)to e-filing.

as a CPA, I am honestly tongue tied at many of the stiff resistance shared via comments to Jody's article.

The US is a Forward Thinking, Pioneer & Vanguard. It has always sought to be that way, wiki leaks or no wiki leaks, SEC, Wall Street or Presidential Scandals or National Shame moments. We are a progressive nation and are not prone to crawl up and hide away BUT we seek to mitigate risks and issues springing from problems.

Many of you would have heard of the term "Sans Recourse Negotiable Instruments", well the electronic age is like that.
We need to embrace its benefits and address loop holes and concerns, not by Status Quo or regressive methods.

I do not say any of the above with malice or rancour but with understanding and assimilation of facts and due cognizance to each of them.

I am glad I am not alone like Robinson Crusoe on a Lonely Island on the essence of e-filing among many fellow CPA Professionals. Best to all, Koshy P.George, CPA
Posted by KPGEORGE | Thursday, January 27 2011 at 3:17PM ET
Travis, my man, lets look at what your saying here.

I would think that the "vulnerability factor" (maybe some IT geeks could jump in here) would be much higher when tax return data originates from your desktop, and is potentially "exposed" for quite a while through the internet till it gets to IRS.
Now I grant that there could be security problems as well when processing paper forms, but there is a smaller, controlled environment, and I am sure that IRS handles those risks fairly well, as we have not heard of major problems.

I also believe that federal and state tax agencies do a significant amount of scanning of documents these days, and not so much of the manual entry. This would address the accuracy factors and reduce time for curious eyes of IRS employees.

Paper copies can not yet be totally eliminated, as many of my clients use them to satisfy bank loan requirements, and college and other schooling financial aid requests, etc.

So, it is nice that electronic filing is an option, but that is where it should stay, and not be mandatory.
Posted by geodrum | Thursday, January 27 2011 at 1:11PM ET
E-filing has been around for closer to two decades. That's how long I have been in the process. It is faster, easier, less errors and of course saves paper. That helps the environment.
Posted by cathysrefuge | Wednesday, January 26 2011 at 12:03PM ET
I'm amazed by some of the comments posted here. Concerns about IRS systems security, for example, are likely valid or at least worth further consideration, but the requirement to e-file returns doesn't alter the vulnerability of information provided to the IRS, whether by electronic or paper means. Does that escape anyone's attention? What do you think the IRS does with the paper returns ... they hand-key them into an electronic format. Also, let's imagine a different reality, one where electronic filing were available to practitioners for the past 20 or more decades and the IRS were now asking that everyone file on paper, or maybe some other new means of filing. What would everyone's reaction be then? Change?! No thanks - I want e-filing as it is. Seriously folks ... this is a simple evolutionary change, not revolutionary, and the opportunities as practitioners should be embraced, not scorned or feared. Efficiencies for your practice and clients are available, but won't be obvious until you change your mindset. For my fellow skeptics, Big Brother was already there, and e-filing won't change that for the good OR the bad. Jody has it right in her post ... embrace change and lead!
Posted by TravisDrouin | Wednesday, January 26 2011 at 12:32AM ET
Quoted from IRS Newswire Dec 1, 2010

"under the proposed regulations, the e-file requirement does not apply to an individual income tax return when a tax return preparer's taxpayer-client chooses to have the return completed in paper format and the taxpayer-client, and not the preparer, will file the paper return with the IRS. "
Posted by geodrum | Tuesday, January 25 2011 at 11:21PM ET
I do not like e-filing at all. It's a bad idea, an additional expense in terms of time and management, and a great economic and military risk for the country to rely on the IRS's flimsy computer systems, and a highly vulnerable electric grid to support the nation's essential revenue streams. If I were running the defense department, or even the IRS, or the country, I'd most definitely object to this push - what - to take on such high risk to save a few dollars for the IRS at a greater expense to practitioners and clients, on each return ? I've made numerous calls to the IRS only to learn that I must call back later because systems are being upgraded or the systems are too slow right now. Has anyone tried using the IRS's PTIN application form on the internet? I found it impossible after trying for about 15 days straight - I finally sent in a paper application. I'm sad to say it, but this is another well-intentioned government program that's fraught with risk and problems - it will be used, and indeed has been used, as a government bullying tactic. The PTIN and the E-file applications are duplicative and wasteful. I could also mention many other major problems with this E-file push; however enough said for now.
Posted by Jonesey | Tuesday, January 25 2011 at 9:58PM ET
All due respect Jody, you are thinking incorrectly here.
At a recent seminar, with IRS personnel speaking about these efiling mandates, I asked if they ever heard of Wiki-Leaks? I then proceeded to ask them if they think that their IT systems are more secure than the Defense Dept or the State Dept? No appropriate answer.
I am wondering just how long it will take(not if) until some hacker figures out a way of penetrating the IRS for interesting things, like identity theft or creating their own refund checks. So, IRS is forcing all this data to be "put into play".
Do I need a "higher" security standard for my computer system as well? Do I risk a new liability exposure?

And as I heard another accountant discuss this; where is my paycheck from the government? as I am helping them to do their job. We accountants are already using ink and paper, which are costs that are passed on to the public. Should not the government be happy if they get 70% or more the efile way?
My clients have not even asked about efile, nor should most people care, especially those who end up owing.

I understand that this mandate came down from "Congress", and we all have seen that body in action, where the elected representatives apparently do not draft their own legislation, nor read it (2000 page medical act with 1099 requirement) after their 20something year old staffers draft stuff that they no nothing about.
Posted by geodrum | Tuesday, January 25 2011 at 7:15PM ET
Read the fine print. It is not mandatory if you have not efiled in the past and do not mail returns for clients. It says "If your firm submits the tax return to the IRS. See # 6 under FAQ. As to not allowing anyone to paper file, that is why there is Form 8948.
Posted by cord812 | Tuesday, January 25 2011 at 6:36PM ET
For a free society it is amazing how many are willing to give up choice. The government of course likes e-file, but that doesn't mean there aren't legitimate reasons that clients and CPAs don't like it. I'll be offering e-file for the first time this year,but would rather not, unfortunately that choice has been taken away.
Posted by cperkcpa | Tuesday, January 25 2011 at 5:10PM ET
I agree the title was misleading and do not like the tone! Are you aware of the EXTRA audit steps taken on a return prior to it being accepted? The big brother trend is getting woarse and the profession is not stepping up to stop it. Don't worry you will lose more clients with your attitude.
Posted by monkey234 | Tuesday, January 25 2011 at 4:24PM ET
Bravo Jody! I have always wondered despite the friendly cajoling by IRS since a while, professional tax software vendors encouraging it since eons, AICPA and State Boards encouraging it, still there are a vast remanant of our August Profession who are reticent to this genuine and very wonderful move to e-filing. That is a shame.
I am newly into practice, but I have made it a hallmark from day One of my Practice that the mandate is e-filing except when there is no alternative.
There is an old saying: "when the cat is away, the mouse are at play"....not for long, I reckon, 'cause the mandate is indeed to e-file. Be it 1040, 1065, 1120, 990 and others.
Fellow members in practice please get on the band wagon....better late than ever! Your clients expect you to lead, not to be lead.
To those who resist may I ask you: "would you still prefer to have macaroni and cheese and crackers, when there is a banquet prepared for you called e-filing???...mind you the macroni and cheese and crackers are getting more and more rationed, whereas the feast at the table of e-filing is getting bigger and better...hop on!"
Our brave fellow member in the Profession is right!
Best to all,
Koshy P.George, CPA
Posted by KPGEORGE | Tuesday, January 25 2011 at 2:04PM ET
the reason i haven't efiled until this year is that i did not feel like being treated like a criminal and fingerprinted. but now it's mandatory, and i'll go to my local police station between 2 and 4 pm and give them my prints.

i won't feel great about that, but it's just another humiliation we have to put up with to earn our keep.
Posted by phdesmond | Tuesday, January 25 2011 at 1:37PM ET
If the IRS had made it easier and simpler to e-file,
many CPA's would have adopted the concept some time ago.
However, like most things in government, they have to make it complicated, and absurdly so. Why do I have to have an application to get an application? And most of my clients
are of the older generation and want nothing to do with e-
filing. Better to have a process allowing people to select which method to file rather than one size fits all mentality
Posted by douglasnewton | Tuesday, January 25 2011 at 1:29PM ET
You must be very wealthy to just say let's lose clients, which to me is an unprofessional short sighted way to run a firm who mal have very loyal clients who do not understand efiling. Don't lecture us as paper filing has worked well for all these years if done correctly, by the way, I have been trying to get my efin number for 4 months but our beloved IRS keeps screwing up my online appication
Posted by KENNETH H | Tuesday, January 25 2011 at 1:28PM ET
My client base is largely comprised of very complicated tax filers. I began e-filing last year and found it to be a nightmare - separate forms that required mailing in addition to e-filing; state and local returns that do not accept e-filing so part is paper and part is electronic; and worst of all, returns that cannot be e-filed for various reasons, such as pensions from foreign employers who do not have a U. S. ID number or returns that contain one or more forms that can't be e-filed. That's the logistical part. Then there's the software cost, mailing 8879s back and forth, and IRS downtime just to add to the aggravation. A relatively simple "H & R Block" type clientele would make e-filing great but it's not for me.
Over 25% of my clients wanted to e-file but couldn't. Jody, I'll bet you like "Obamacare", too.
Posted by jackgcpa | Tuesday, January 25 2011 at 12:44PM ET
Sorry, I disagree. I don't need the federal government or the State of California to tell me how to run my practice. I suppose you'll just roll over and play dead with complying with the absurd new 1099 rules, too. Big Brother is not looking out for anyone's interest except his own.
Posted by mikehinton | Tuesday, January 25 2011 at 12:22PM ET
As a first-time e-filer I thought this article would give me some guidance. Instead I was subjected to criticism for not e-filing before. Very misleading title.
Posted by garyscpa | Tuesday, January 25 2011 at 12:20PM ET
I followed the same practice last year and had ALL my clients efile. Not one of them complained. The service itself admits its own error rate on manually processing returns is close to 20% while the error rate of efiled returns is less than 1%. Why would you not want to efile?
Posted by rivescpa | Tuesday, January 25 2011 at 12:13PM ET
"My stance? Clients must follow our process, or they should find another firm." You can send them my way Jody. We do both paper and E-file. Of course we're all about client satisfaction.
Posted by tnacct | Tuesday, January 25 2011 at 12:12PM ET
Nice perspective, Jody! I agree, the first attempt may be cumbersome to insure proper set up, but once done, legacy firms will be wondering why they did not do it sooner.
Posted by deductme | Monday, January 24 2011 at 11:07AM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.