I have always said that blog post COMMENTS often get “lost in the shuffle”. Individuals who read a post do not always read through the comments. And, as comments are posted after the fact, sometimes days later, readers do not usually go back to see subsequent comments, unless they have posted one themselves or are keenly interested in the topic.
I received several responses to my posts on the e-file mandate for paid tax preparers – via Comment, email, posts by fellow tax bloggers, and “tweets”.
+ Paul C. Cinquemani, the National Association of Tax Professionals’ government affairs man, and I exchanged several emails on the subject. Here is what Paul had to say-
“I really haven’t heard anything at all about the IRS providing free online filing to tax preparers who are now required to do so under the “mandate.” I’ve heard a whole heckuva lot about free online filing for taxpayers though!
My guidance on e-filing would be to learn how…seriously. Feedback is that it’s easy and efficient, saving preparers lots of time and expediting processing for clients. I know some preparers are going to have clients fill out “opt out” forms. Some are going to just prepare returns and give them to their clients to file. In either case, documentation is mandatory for your safety in showing good faith. The IRS will have your PTIN number and will quite probably ask why returns were not e-filed. We’ve asked about the “opt out” provision as regards the mandate, and we’ve not received any answers. We do know that the IRS will take a dim view of it. It wouldn’t surprise me to learn that the IRS will likely investigate it. They are very determined to get returns electronically.
We’ll just have to wait and see where that goes. We will continue to press for an answer. We are not alone. Many organizations have the exact same question.”
+ Among those who submitted comments on the posts was TAX MAMA Eva Rosenberg – a well-respected long-time member of the “Tax Blogosphere”, who offers “Tax Information With A Mother’s Touch”.
Eva assured me that tax software was not all that expensive and would not substantially increase my per-return costs.
She also stated –
“The fact is, using professional tax software reduces your errors. It saves you time over preparing returns by hand - changes can be made to all relevant forms at one time, without lots of erasures. They include tools and calculators to quickly help you test scenarios - like MFS vs MFJ. The time it saves you more than makes up for the extra $10 per client - and gives you more time to take on more clients.”
(1) Tax preparation software will not reduce errors. In theory it will limit math and carryforward errors, but that is not always true. It has the potential to create different kinds of errors. One must do a thorough check of a return that the computer spits out in the exact same manner as one would with a manually prepared return.
(2) Tax preparation software will not save me time over preparing returns by hand. Over the years I have developed a certain style and rhythm so that I can prepare manual returns quickly without sacrificing accuracy.
Decades ago when I worked for one of the then ‘big-8” accounting firms we would use Computax to prepare returns. I would fill out an input sheet which would he given to a data entry clerk. At the time I felt that by the time I finished preparing the input sheet I could have completed the manual return.
(3) I do agree that tax preparation software does save time in terms of “rewrites”. If an error on one or two lines is discovered the correction can be made quickly without having to rewrite the entire return. And software applications can make it easier to review different scenarios. However I find that I can compare filing jointly to filing separately quickly by hand using a worksheet I have developed.
There are disadvantages of tax preparation software.
At every single continuing education workshop I attend either the instructor or a participant will say – “Your software will not, or cannot, do this properly – so you will have to ‘force’ the answer”.
Tax preparation software generates mountains of unnecessary subsidiary and auxiliary print-outs (as does the NJWebFile system as well). It wastes tons of paper.
+ Another well-respected member of the tax blogging community, and practicing tax professional, Trish McIntire of OUR TAXING TIMES posted this comment –
“Robert, I am sorry to read you are planning on retiring.
Mandatory e-filing is coming. The IRS might slow down the timetable but it won’t be stopped. And with everything else happening, I don’t expect to see the IRS come up with their own online filing system anytime soon.
The mandate targets the preparer and not the taxpayer because it’s the preparer that is the hold up. Presented with the advantages of e-filing, I have found few clients who still insist on paper filing. How many of your clients would like the added convenience of e-filing but stick with you because they trust your work? Are there any who take the return you prepare and go to a 3rd party for filing electronically? Like doctors, it hard to change a tax preparer unless there is a big problem. If they like you, they will handle a little in inconvenience over the unknown of changing preparers.
As for the software issue, I am sure all tax software has flaws but so do all tax preparers. No matter which package you choose, you will disagree with how they handle some issues. Just as you and I can disagree about the interpretation of a tax rule. The key is finding the software that is the best fit to you and to check the returns it produces. My software generates the return; I prepare it, sign it and stand behind the results. If I can’t do that, I’ll find a new software vendor.
Robert, I can’t imagine dealing with all the changes you will have to in the next few months (e-filling mandate and tax preparer registration/testing). You can say “No!” it’s not worth it and give up a job you like. Or you can the make changes. Think of all the blog posts the transitions will generate.
Good luck!”
Not to worry, Trish. I don’t plan to retire until I can say I have prepared taxes for 50 years (or unless I win big in the lottery – which I do not play – or at Atlantic City). Besides, my clients would let me retire yet! Once you’ve had Flach you never go back.
I do not believe that it is the tax preparer that is holding up the progress of electronic filing. I believe the only reason so many returns are currently filed electronically is because of tax professionals. Many individuals are wary of electronic transmittal of private and personal information.
None of my clients, past or present, have ever balked about my not filing returns electronically. A couple of newer ones, usually the finally grown children of existing clients, have asked if I do – but have not shown concern when I tell them I cannot. I do not know if any client who has taken my completed manual return to an e-file “service”.
The only advantage to the taxpayer for filing NJ state returns electronically is that they can get their refund quicker. Many of my clients, at my strong suggestion, elect direct deposit, which is available on paper returns. And still, many of my clients still prefer to get a check in the mail.
Why must I be forced to turn to a software package when the “best fit” is my brain?
I look forward to registration and licensure, and have been a vocal advocate for registration and licensure during the entire decision-making process – although I still strongly disagree with no grandfathering and with exempting CPAs and attorneys from testing and CPE. Licensure and registration will certainly not be giving me any changes with which to deal.
And if the IRS does not “do the right thing” I will simply have to find a bulk e-file service provider and charge my clients the extra $10 or so it will cost to have the return transmitted electronically by this service, loudly blaming Congress for the imposition of the additional fee.
+ Echoing Trish’s comments was Bruce, the MISSOURI TAX GUY, another practicing pro and blogger, whose help I have called upon in the past.
“Interesting, my friend.
Sadly I have been wonder the same things that Trish has mentioned here. You cannot stop the mandate. I do fore see there will be an “opt out” for the individual taxpayer but not for the tax preparer. We will be required to at least offer it. I say at least because although the odds are against it, I could see all of your clients actually opting out of the e-file mandate.
I am not sure where you are in your efforts to retire but I feel confident that the IRS is on a much quicker pace than you might be.
I would agree with Trish, that no matter what software you obtain (if you do) I am happy with three that are still available. (There was another at one point but Inuit bought it many years ago.) The truly nice thing is if the software doesn’t act accordingly or does something you don’t like there is usually away to over ride its calculations. So, in your case, you would merely need to re-input you calculations. That’s what I do.
I hope there is some way to get you to change your mind as I can assure you as Trish has, the change is coming, and in order to stay afloat, we’ll need to change as well.”
Hey, guys, I know full well that I cannot personally OPT OUT as a tax preparer. Only the client can OPT OUT.
If I cannot find a way to comply that does not involve purchasing flawed tax preparation software I would ask all of my clients to do so.
The NJ OPT OUT form has an optional line where the taxpayer can explain, if they wish, why he/she is opting out. If a similar option appeared on the federal form my clients would all write –
“The IRS does not provide a free way for my tax preparer to directly submit returns online at its website. I do not want to increase my preparer’s expenses, and ultimately my fee, by forcing him to purchase flawed tax preparation software.”
+ Joe Kristan told me like it was in a post on my letter to Shulman -
“Remember, Robert, it's for their convenience, not yours or your clients, and they are bigger. That's all they care about.”
+ Elizabeth Rue (@Eligabiff) of Personal Financial Services in Indiana “tweeted” me the following -
“I suspect if you had to file your returns in Fresno CA you would change your mind on e-filing! They have incorrectly processed & seriously delayed processing almost EVERY paper return we submitted this year.”
While I have obviously had to deal with lots of IRS FU’s over the years (and what tax pro hasn’t) I have not found excessive incorrect or delayed processing with my manual returns. But then I don’t send my returns to Fresno.
Thanks to all of the above for taking the time to provide their more than 2 cents on the subject. I always welcome comments from my colleagues “in the trenches”.
Let me end with some more of my own rambling thoughts on the subject -
Tax preparation software appeared long before the ability to submit returns electronically. I remember seeing computer-generated returns as early as the late 1970s. Tax professionals elected to use such software because they believed that doing so would benefit their individual practice. Others, like my mentor and myself, chose not to use tax preparation software, because they saw no substantial benefit to their practice.
When electronic transmittal of tax information to the IRS became available, software companies incorporated this into their tax preparation products. Specialized software was needed to accomplish the transmittal.
If tax return preparers will be required to submit 1040s electronically, the requirement should only apply to those preparers who have the ability to do so. If you currently use tax preparation software and therefore have the ability to transmit the resulting tax return electronically you should be required to do so, unless the client specifically forbids you.
But what of the tax preparer who does not currently have the ability to submit returns electronically. Why must they incur the burden of paying for the ability?
If the government wants something done in a certain way – the only purpose of which is for the convenience of the government (and not for public safety or protection) they should make it as easy and inexpensive as possible to comply. They should not force otherwise unnecessary and excessive costs on those who are required to comply.
TTFN
I received several responses to my posts on the e-file mandate for paid tax preparers – via Comment, email, posts by fellow tax bloggers, and “tweets”.
+ Paul C. Cinquemani, the National Association of Tax Professionals’ government affairs man, and I exchanged several emails on the subject. Here is what Paul had to say-
“I really haven’t heard anything at all about the IRS providing free online filing to tax preparers who are now required to do so under the “mandate.” I’ve heard a whole heckuva lot about free online filing for taxpayers though!
My guidance on e-filing would be to learn how…seriously. Feedback is that it’s easy and efficient, saving preparers lots of time and expediting processing for clients. I know some preparers are going to have clients fill out “opt out” forms. Some are going to just prepare returns and give them to their clients to file. In either case, documentation is mandatory for your safety in showing good faith. The IRS will have your PTIN number and will quite probably ask why returns were not e-filed. We’ve asked about the “opt out” provision as regards the mandate, and we’ve not received any answers. We do know that the IRS will take a dim view of it. It wouldn’t surprise me to learn that the IRS will likely investigate it. They are very determined to get returns electronically.
We’ll just have to wait and see where that goes. We will continue to press for an answer. We are not alone. Many organizations have the exact same question.”
+ Among those who submitted comments on the posts was TAX MAMA Eva Rosenberg – a well-respected long-time member of the “Tax Blogosphere”, who offers “Tax Information With A Mother’s Touch”.
Eva assured me that tax software was not all that expensive and would not substantially increase my per-return costs.
She also stated –
“The fact is, using professional tax software reduces your errors. It saves you time over preparing returns by hand - changes can be made to all relevant forms at one time, without lots of erasures. They include tools and calculators to quickly help you test scenarios - like MFS vs MFJ. The time it saves you more than makes up for the extra $10 per client - and gives you more time to take on more clients.”
(1) Tax preparation software will not reduce errors. In theory it will limit math and carryforward errors, but that is not always true. It has the potential to create different kinds of errors. One must do a thorough check of a return that the computer spits out in the exact same manner as one would with a manually prepared return.
(2) Tax preparation software will not save me time over preparing returns by hand. Over the years I have developed a certain style and rhythm so that I can prepare manual returns quickly without sacrificing accuracy.
Decades ago when I worked for one of the then ‘big-8” accounting firms we would use Computax to prepare returns. I would fill out an input sheet which would he given to a data entry clerk. At the time I felt that by the time I finished preparing the input sheet I could have completed the manual return.
(3) I do agree that tax preparation software does save time in terms of “rewrites”. If an error on one or two lines is discovered the correction can be made quickly without having to rewrite the entire return. And software applications can make it easier to review different scenarios. However I find that I can compare filing jointly to filing separately quickly by hand using a worksheet I have developed.
There are disadvantages of tax preparation software.
At every single continuing education workshop I attend either the instructor or a participant will say – “Your software will not, or cannot, do this properly – so you will have to ‘force’ the answer”.
Tax preparation software generates mountains of unnecessary subsidiary and auxiliary print-outs (as does the NJWebFile system as well). It wastes tons of paper.
+ Another well-respected member of the tax blogging community, and practicing tax professional, Trish McIntire of OUR TAXING TIMES posted this comment –
“Robert, I am sorry to read you are planning on retiring.
Mandatory e-filing is coming. The IRS might slow down the timetable but it won’t be stopped. And with everything else happening, I don’t expect to see the IRS come up with their own online filing system anytime soon.
The mandate targets the preparer and not the taxpayer because it’s the preparer that is the hold up. Presented with the advantages of e-filing, I have found few clients who still insist on paper filing. How many of your clients would like the added convenience of e-filing but stick with you because they trust your work? Are there any who take the return you prepare and go to a 3rd party for filing electronically? Like doctors, it hard to change a tax preparer unless there is a big problem. If they like you, they will handle a little in inconvenience over the unknown of changing preparers.
As for the software issue, I am sure all tax software has flaws but so do all tax preparers. No matter which package you choose, you will disagree with how they handle some issues. Just as you and I can disagree about the interpretation of a tax rule. The key is finding the software that is the best fit to you and to check the returns it produces. My software generates the return; I prepare it, sign it and stand behind the results. If I can’t do that, I’ll find a new software vendor.
Robert, I can’t imagine dealing with all the changes you will have to in the next few months (e-filling mandate and tax preparer registration/testing). You can say “No!” it’s not worth it and give up a job you like. Or you can the make changes. Think of all the blog posts the transitions will generate.
Good luck!”
Not to worry, Trish. I don’t plan to retire until I can say I have prepared taxes for 50 years (or unless I win big in the lottery – which I do not play – or at Atlantic City). Besides, my clients would let me retire yet! Once you’ve had Flach you never go back.
I do not believe that it is the tax preparer that is holding up the progress of electronic filing. I believe the only reason so many returns are currently filed electronically is because of tax professionals. Many individuals are wary of electronic transmittal of private and personal information.
None of my clients, past or present, have ever balked about my not filing returns electronically. A couple of newer ones, usually the finally grown children of existing clients, have asked if I do – but have not shown concern when I tell them I cannot. I do not know if any client who has taken my completed manual return to an e-file “service”.
The only advantage to the taxpayer for filing NJ state returns electronically is that they can get their refund quicker. Many of my clients, at my strong suggestion, elect direct deposit, which is available on paper returns. And still, many of my clients still prefer to get a check in the mail.
Why must I be forced to turn to a software package when the “best fit” is my brain?
I look forward to registration and licensure, and have been a vocal advocate for registration and licensure during the entire decision-making process – although I still strongly disagree with no grandfathering and with exempting CPAs and attorneys from testing and CPE. Licensure and registration will certainly not be giving me any changes with which to deal.
And if the IRS does not “do the right thing” I will simply have to find a bulk e-file service provider and charge my clients the extra $10 or so it will cost to have the return transmitted electronically by this service, loudly blaming Congress for the imposition of the additional fee.
+ Echoing Trish’s comments was Bruce, the MISSOURI TAX GUY, another practicing pro and blogger, whose help I have called upon in the past.
“Interesting, my friend.
Sadly I have been wonder the same things that Trish has mentioned here. You cannot stop the mandate. I do fore see there will be an “opt out” for the individual taxpayer but not for the tax preparer. We will be required to at least offer it. I say at least because although the odds are against it, I could see all of your clients actually opting out of the e-file mandate.
I am not sure where you are in your efforts to retire but I feel confident that the IRS is on a much quicker pace than you might be.
I would agree with Trish, that no matter what software you obtain (if you do) I am happy with three that are still available. (There was another at one point but Inuit bought it many years ago.) The truly nice thing is if the software doesn’t act accordingly or does something you don’t like there is usually away to over ride its calculations. So, in your case, you would merely need to re-input you calculations. That’s what I do.
I hope there is some way to get you to change your mind as I can assure you as Trish has, the change is coming, and in order to stay afloat, we’ll need to change as well.”
Hey, guys, I know full well that I cannot personally OPT OUT as a tax preparer. Only the client can OPT OUT.
If I cannot find a way to comply that does not involve purchasing flawed tax preparation software I would ask all of my clients to do so.
The NJ OPT OUT form has an optional line where the taxpayer can explain, if they wish, why he/she is opting out. If a similar option appeared on the federal form my clients would all write –
“The IRS does not provide a free way for my tax preparer to directly submit returns online at its website. I do not want to increase my preparer’s expenses, and ultimately my fee, by forcing him to purchase flawed tax preparation software.”
+ Joe Kristan told me like it was in a post on my letter to Shulman -
“Remember, Robert, it's for their convenience, not yours or your clients, and they are bigger. That's all they care about.”
+ Elizabeth Rue (@Eligabiff) of Personal Financial Services in Indiana “tweeted” me the following -
“I suspect if you had to file your returns in Fresno CA you would change your mind on e-filing! They have incorrectly processed & seriously delayed processing almost EVERY paper return we submitted this year.”
While I have obviously had to deal with lots of IRS FU’s over the years (and what tax pro hasn’t) I have not found excessive incorrect or delayed processing with my manual returns. But then I don’t send my returns to Fresno.
Thanks to all of the above for taking the time to provide their more than 2 cents on the subject. I always welcome comments from my colleagues “in the trenches”.
Let me end with some more of my own rambling thoughts on the subject -
Tax preparation software appeared long before the ability to submit returns electronically. I remember seeing computer-generated returns as early as the late 1970s. Tax professionals elected to use such software because they believed that doing so would benefit their individual practice. Others, like my mentor and myself, chose not to use tax preparation software, because they saw no substantial benefit to their practice.
When electronic transmittal of tax information to the IRS became available, software companies incorporated this into their tax preparation products. Specialized software was needed to accomplish the transmittal.
If tax return preparers will be required to submit 1040s electronically, the requirement should only apply to those preparers who have the ability to do so. If you currently use tax preparation software and therefore have the ability to transmit the resulting tax return electronically you should be required to do so, unless the client specifically forbids you.
But what of the tax preparer who does not currently have the ability to submit returns electronically. Why must they incur the burden of paying for the ability?
If the government wants something done in a certain way – the only purpose of which is for the convenience of the government (and not for public safety or protection) they should make it as easy and inexpensive as possible to comply. They should not force otherwise unnecessary and excessive costs on those who are required to comply.
TTFN
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