By now, tax practitioners know that e-filing is here to stay. Every year, changing mandates increase the number of businesses required to file their federal tax returns electronically, and the Internal Revenue Service offers more and better ways for tax pros to interact electronically with the service.Even if the e-file mandate hasn't affected your clientele, do yourself and your clients a big favor: Prepare for electronic filing early and take advantage of all of the electronic services now available from the Internal Revenue Service.
While federal e-filing mandates for corporations first began in 2004, the threshold for the mandate has changed several times. For 2006, corporations that had $10 million or more in assets and filed at least 250 information returns must e-file their Forms 1120 via the IRS's modernized e-file platform - an e-filing tool that is here to stay.
If the e-filing mandate does not affect your clients this year, then take advantage of the extra time: Go ahead and prepare your data collection processes for the changes that e-filing will bring. Because even if you don't voluntarily take advantage of the benefits of e-filing now, mandates will probably catch up with you in the future. The technology aspect of e-filing creates the biggest impact, particularly in terms of software and process issues.
Because of the far-reaching impact of e-filing on the practitioner's day-to-day processes, your software vendor should be your new best friend for this and every other filing season. In addition to training programs, a good software vendor can also provide you with feedback on how you can change your processes to better fit the new and changing requirements of e-filing.
If you or your clients were counting on a waiver to get out of a corporate e-filing requirement, understand that the chances of actually getting a waiver are slim. IRS Notice 2005-88 provides specific information regarding one-time electronic filing waivers, but the IRS will not hand out these waivers easily.
IRS INTERACTION: ELECTRONIC OPTIONS
The savvy tax practitioner can take advantage of a number of time-saving options to interact electronically with the IRS. In the midst of a busy filing season, these around-the-clock electronic options can be a lifesaver:
* E-services. The IRS developed the robust e-services suite of applications specifically for tax professionals. These self-serve applications allow the practitioner to complete many key functions online, including address changes, form requests, taxpayer identification number matches, and the automated Transcript Delivery System.
The IRS has also reduced to five the number of returns required to qualify for e-services, extending this timesaving tool to many more practitioners.
* Electronic Federal Tax Payment System. The EFTPS allows electronic payment of federal taxes. Registration is required in order to use it, although tax practitioners who submit an online Employer Identification Number application are automatically registered for this service. Publication 3611 provides detailed information on the EFTPS, and a free software download is now available at www.eftps.gov.
* Where's My Refund? This program allows real-time tracking of the status of a federal tax refund, including the date of the expected direct deposit. The tax practitioner can also use this program to provide a change of address before a refund check goes out, avoiding a delay in getting the refund to the client.
* Electronic account resolution. This is essentially an electronic version of the Practitioner Priority Service. While some practitioners may prefer to call PPS to resolve an issue, EAR is very useful for some issues, such as abatement of penalties based on reasonable cause. Approval turnarounds using EAR are much faster than PPS - three days versus about a month, in some cases.
Stay alert and stay tuned
With e-filing, tax practitioners have to keep abreast of the latest mandates - remember, the corporate mandate threshold is bound to change again - as well as the latest options for time-saving electronic interaction with the IRS. Expect to see more changes as the IRS works to improve and expand its electronic offerings.
By embracing the electronic side of tax preparation and planning, tax professionals can reduce errors, save time and generally provide better service to their clients.
Boyd Gackle, CPA, is the GoSystem product manager for Thomson Tax & Accounting and a panelist for Tax Talk. He has been actively involved in the Modernized Electronic Filing project.
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