As requested, I received many comments on my post “The New E-File Mandate” from fellow taxpros and tax bloggers.
Joe Kristan was the first to weigh in on the subject in his post “A Line in the New Jersey Sand” at the ROTH AND COMPANY TAX UPDATE BLOG.
“I think Robert is right as a policy matter, and the IRS shouldn't require e-filing unless it provides a reliable and cheap mechanism for it. As a practical matter, though, I think Robert will lose this battle. The IRS is bent on forcing through more e-filing, and they are bigger than he is.”
Russ Fox, an EA from California, discusses my opinion in the post “It Depends on What the Meaning of the Word ‘Is’ Is” (referring to Slick Willy) at TAXABLE TALK.
“Technically, he’s likely correct that he does not have to file returns electronically.”
However Russ feels, and I agree, that it would be expensive for me to prove I am correct in court – which I have no intention of doing.
Peter Reilly, author of the blog PASSIVE ACTIVITIES AND OTHER OXYMORONS, submitted the following comment at TWTP –
“Interesting problem. I appreciate your distinction between preparing and filing. I'm worried it may be lost on Congress though. The Committee report says:
Explanation of Provision
The provision generally maintains the current rule that regulations may not require any person to file electronically unless the person files at least 250 tax returns during the calendar year. However, the proposal provides an exception to this rule and mandates that the Secretary require electronic filing by specified tax return preparers. ‘Specified tax return preparers’ are all return preparers except those who neither prepare nor reasonably expect to prepare ten or more individual income tax returns in a calendar year. The term ‘individual income tax return’ is defined to include returns for estates and trusts as well as individuals.”
Professor Mary O’Keefe, of BED BUFFALOES IN YOUR TAX CODE, also submitted a comment-
“I agree with Riles. You make an important distinction between preparing and filing.
(The confusing reference to who is "filing" the return reminds me of the word play in Shakespeare's Much Ado About Nothing in the interchange with the friar about who is "marrying" who. Does the friar marry the bridge and groom or do they marry one another.)
The legal usage of the term "filing" to refer to what the preparer does when he submits a return on behalf of a taxpayer does appear to require more clarification.”
Enrolled Agent Elizabeth R commented -
“You do make an interesting distinction in your post. I wonder, do you plan to have all your clients sign the electronic filing opt out that is supposed to be available?”
The answer is yes, if I cannot receive an exemption from the IRS. Or look for an E-Filing service that will submit all my returns electronically for a small fee, passed along very vocally to the client.
Bruce MacFarland, aka the MISSOURI TAX GUY, also submits a comment agreeing with me-
“Your interpretation of the wording of this new requirement is just and in my own mind sound.”
However he also agrees with our colleagues concerning practicality-
“Sadly, my friend, ‘playing the game’ is just what you will have to do.”
He suggests an alternative to an E-File mandate-
“Hey, Mr. Congress person and IRS man. Instead of going at it the way you are why not try mandating ERO status, thus prepares being able to offer E-file but leaving the choice up to the individual taxpayer.”
Bruce also comments on my manual preference-
“I agree on certain fronts it {tax preparation software – rdf} is ‘potentially flawed and expensive’, however there is software out there that is inexpensive and would suit your needs and allow you to comply with the new coming rules. You would basically prepare your clients returns by hand has you always have, then type your numbers into your software and transmit.”
In such a situation software would not reduce the time it took me to prepare a return but increase it by adding an additional unnecessary step to the process.
A word to Bruce – my 50th tax season is 10 1/3 years away and not 1. I am not that old yet!
Hal Leahy, an Enrolled Agent from Florida, provided a history of the mandate to show –
“There is a very good case to be made that by Congressional intent – ‘file’ includes ‘prepare’.”
Please take the time, at your leisure, to read through all of the comments submitted to my post in full.
A fellow member of the National Association of Tax Professionals had the following to say about my post over at the Association’s Member2Member site –
“If you are still preparing returns manually, I don't believe you will be required to submit them electronically. I believe there will be an exception for non-computer produced returns.
Most states requiring e-file have taxpayer 'opt out' forms. The taxpayer just gives a good excuse. Right now my excuse for all California returns is "preparer not set up to EF California returns." Maybe you can come up with a 'conscientious objector' status for all of your clients.”
I hope he is right about an automatic exception for non-computer produced returns.
My sincere thanks to my fellow tax pros who have provided me with their thoughts on the issue. As always I value your opinions. And I apologize for leaving Monica, Stacie and Michael out of my blogroll call for comments – I would love to hear your opinions.
The consensus seems to be that what I have said in my post is right. I am technically correct in my interpretation of the law as written – but that this doesn’t matter in the long run.
The bottom line is simple. It is obvious that, regardless of how the law was worded, it was the intent of Congress to force tax preparers to submit their clients’ returns electronically.
The IRS would not be able to enforce an e-file mandate placed where it should be placed – on the individual taxpayer. So it tries to get its way by aiming the mandate where it can be enforced – on the tax preparer. They require that we submit our returns electronically because they can. The IRS has the taxpro by the balls – it a preparer does not comply the IRS can fine him/her and, with the new regulation regime, threaten to take away his/her PTIN.
To be honest, most tax preparers do use tax preparation software, no matter how expensive and flawed, and can very easily submit the completed return electronically at no, or minor, additional cost. I expect that most taxpros using software already do submit as many of their returns as possible this way.
But I don’t – and therefore I can’t. I hope the IRS exempts from the requirement those few of us left who still do it the old-fashioned way.
TTFN
Joe Kristan was the first to weigh in on the subject in his post “A Line in the New Jersey Sand” at the ROTH AND COMPANY TAX UPDATE BLOG.
“I think Robert is right as a policy matter, and the IRS shouldn't require e-filing unless it provides a reliable and cheap mechanism for it. As a practical matter, though, I think Robert will lose this battle. The IRS is bent on forcing through more e-filing, and they are bigger than he is.”
Russ Fox, an EA from California, discusses my opinion in the post “It Depends on What the Meaning of the Word ‘Is’ Is” (referring to Slick Willy) at TAXABLE TALK.
“Technically, he’s likely correct that he does not have to file returns electronically.”
However Russ feels, and I agree, that it would be expensive for me to prove I am correct in court – which I have no intention of doing.
Peter Reilly, author of the blog PASSIVE ACTIVITIES AND OTHER OXYMORONS, submitted the following comment at TWTP –
“Interesting problem. I appreciate your distinction between preparing and filing. I'm worried it may be lost on Congress though. The Committee report says:
Explanation of Provision
The provision generally maintains the current rule that regulations may not require any person to file electronically unless the person files at least 250 tax returns during the calendar year. However, the proposal provides an exception to this rule and mandates that the Secretary require electronic filing by specified tax return preparers. ‘Specified tax return preparers’ are all return preparers except those who neither prepare nor reasonably expect to prepare ten or more individual income tax returns in a calendar year. The term ‘individual income tax return’ is defined to include returns for estates and trusts as well as individuals.”
Professor Mary O’Keefe, of BED BUFFALOES IN YOUR TAX CODE, also submitted a comment-
“I agree with Riles. You make an important distinction between preparing and filing.
(The confusing reference to who is "filing" the return reminds me of the word play in Shakespeare's Much Ado About Nothing in the interchange with the friar about who is "marrying" who. Does the friar marry the bridge and groom or do they marry one another.)
The legal usage of the term "filing" to refer to what the preparer does when he submits a return on behalf of a taxpayer does appear to require more clarification.”
Enrolled Agent Elizabeth R commented -
“You do make an interesting distinction in your post. I wonder, do you plan to have all your clients sign the electronic filing opt out that is supposed to be available?”
The answer is yes, if I cannot receive an exemption from the IRS. Or look for an E-Filing service that will submit all my returns electronically for a small fee, passed along very vocally to the client.
Bruce MacFarland, aka the MISSOURI TAX GUY, also submits a comment agreeing with me-
“Your interpretation of the wording of this new requirement is just and in my own mind sound.”
However he also agrees with our colleagues concerning practicality-
“Sadly, my friend, ‘playing the game’ is just what you will have to do.”
He suggests an alternative to an E-File mandate-
“Hey, Mr. Congress person and IRS man. Instead of going at it the way you are why not try mandating ERO status, thus prepares being able to offer E-file but leaving the choice up to the individual taxpayer.”
Bruce also comments on my manual preference-
“I agree on certain fronts it {tax preparation software – rdf} is ‘potentially flawed and expensive’, however there is software out there that is inexpensive and would suit your needs and allow you to comply with the new coming rules. You would basically prepare your clients returns by hand has you always have, then type your numbers into your software and transmit.”
In such a situation software would not reduce the time it took me to prepare a return but increase it by adding an additional unnecessary step to the process.
A word to Bruce – my 50th tax season is 10 1/3 years away and not 1. I am not that old yet!
Hal Leahy, an Enrolled Agent from Florida, provided a history of the mandate to show –
“There is a very good case to be made that by Congressional intent – ‘file’ includes ‘prepare’.”
Please take the time, at your leisure, to read through all of the comments submitted to my post in full.
A fellow member of the National Association of Tax Professionals had the following to say about my post over at the Association’s Member2Member site –
“If you are still preparing returns manually, I don't believe you will be required to submit them electronically. I believe there will be an exception for non-computer produced returns.
Most states requiring e-file have taxpayer 'opt out' forms. The taxpayer just gives a good excuse. Right now my excuse for all California returns is "preparer not set up to EF California returns." Maybe you can come up with a 'conscientious objector' status for all of your clients.”
I hope he is right about an automatic exception for non-computer produced returns.
My sincere thanks to my fellow tax pros who have provided me with their thoughts on the issue. As always I value your opinions. And I apologize for leaving Monica, Stacie and Michael out of my blogroll call for comments – I would love to hear your opinions.
The consensus seems to be that what I have said in my post is right. I am technically correct in my interpretation of the law as written – but that this doesn’t matter in the long run.
The bottom line is simple. It is obvious that, regardless of how the law was worded, it was the intent of Congress to force tax preparers to submit their clients’ returns electronically.
The IRS would not be able to enforce an e-file mandate placed where it should be placed – on the individual taxpayer. So it tries to get its way by aiming the mandate where it can be enforced – on the tax preparer. They require that we submit our returns electronically because they can. The IRS has the taxpro by the balls – it a preparer does not comply the IRS can fine him/her and, with the new regulation regime, threaten to take away his/her PTIN.
To be honest, most tax preparers do use tax preparation software, no matter how expensive and flawed, and can very easily submit the completed return electronically at no, or minor, additional cost. I expect that most taxpros using software already do submit as many of their returns as possible this way.
But I don’t – and therefore I can’t. I hope the IRS exempts from the requirement those few of us left who still do it the old-fashioned way.
TTFN
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