Monday, June 30, 2008


An article on reports “Committee Wants to Fine Tax Preparers Who Don't E-file”. It seems that the IRS Electronic Tax Administration Advisory Committee has listed this as its No. 1 recommendation.
"At this time, ETAAC believes that all reasonable voluntary means have been exhausted with respect to encouraging preparers to e-file individual tax returns, and it is time to take a stance by announcing an e-file mandate for tax return preparers," the Committee stated in its annual report to Congress.

According to the article - “The mandate would apply to all paid preparers who use tax software and file more than 50 individual returns, with minimum penalties set for non-compliance.”

Those of you who know me know that in my 37 years of preparing 1040s I have never used tax software. I prepare all of the approximately 400 federal income tax returns that I do each year by hand.

I therefore do not file federal income tax returns “electonically”.

It is not that I am against electronic filing because of privacy concerns or any other such reasons. I file the majority of my full-year resident NJ-1040s via the NJ Division of Taxation’s “NJWebFile”, as I am required to do by state law unless the client elects to “opt-out” of electronic filing. I do this because it is free and easy to do. There is no tax software to buy and no need to register - you just go online and do it. I also do it because there is a benefit to my client – it gets a refund check to the client faster, and it is the only way that I can have a NJ state refund directly deposited to the client's bank account

The IRS currently does not offer a free method of filing returns online similar to NJWebFile. In order to file federal returns electronically a tax professional must first spend thousands of dollars to purchase a tax preparation software package, and continue to spend hundreds more each and every year for updates and support. One must then apply to the IRS to become an ERO (Electronic Return Originator). As I understand it the application processs includes providing the federal government with copies of your fingerprints.

I have no intention of wasting thousands of dollars on flawed tax preparation software. For me this is a truly unnecessary expense. When highly publicized tax software errors lead clients and friends to ask me what tax software package I use I simply point to my temple – indicating my brain. When I have raised my hand in response to the question of “who here still prepares 1040s by hand” at tax update seminars I am told by both speakers and participants things like, “You are the only one in the room who really knows how to prepare tax returns.”

I also have no intention of adding my fingerprints to some “big brother” national data base. What if I decide to murder an especially annoying client sometime in the future?

The article indicated that the requirement would apply to “all paid preparers who use tax software”. Since I do not use tax software perhaps I would be exempt from the requirement if passed.

If the Internal Revenue Service allows all taxpayers, and tax professionals, to file 1040s and 1040As for free online at the IRS website – and not via some Free File coalition of fast food tax preparation chains – then I will gladly join the bandwagon and file federal returns electronically.


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