tag:blogger.com,1999:blog-6318055043707993918.post1174579486237421661..comments2024-02-20T02:12:18.090-05:00Comments on THE WANDERING TAX PRO: NEW YORK STATE DEVELOPMENTSRobert D Flachhttp://www.blogger.com/profile/06034127763662917220noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-6318055043707993918.post-91959055599880672282011-12-09T15:53:34.326-05:002011-12-09T15:53:34.326-05:00"If a taxpayer wants to take a risky chance a..."If a taxpayer wants to take a risky chance and prepare his/her own state tax return using software, I expect that the ability to submit the return electronically is included in the package at no additional cost. So why not submit the return electronically?" <br /><br />Here is one reason why a taxpayer might be willing to use software to prepare his tax return, but might NOT be willing to efile it. <br /><br />He would like to file a neat typed return that is easy for the state to process, but would like to limit access to the information on his return so that ONLY federal and state tax authorities see it, and does not want his financial information passing through the hands of a commercial intermediary. <br /><br />Not everyone has terrific handwriting like you do, RDF.<br /><br />Using software creates a neatly typed tax return with OCR-readable characters in the proper boxes. <br /><br />Furthermore, although tax software is flawed and capable of making mistakes, self-prepared returns are also full of mistakes. For many taxpayers, the best approach is a combination of the two--with careful manual cross-checking of the software, and/or using several different software programs to cross-check the calculations.<br /><br />In addition, NYS used to provide tax software publishers with the ability to create 2-D barcoded version of tax returns which were very cheap to process via OCR-readers. I assume that capability will go the way of the dinosaur in the light of the new law.<br /><br />However, the fact that a taxpayer is willing to use software to assist in preparing his return does not necessarily mean that he is willing to share his family's sensitive financial data with the software company. <br /><br />Efiling a return does not mean sending it directly to the IRS. It has to go through an intermediary. That means that Intuit, H&R Block, or some other commercial intermediary gets access to a huge treasure-trove of sensitive financial information (names, SSNs, bank account and routing numbers, amounts of different types of income, etc.)<br /><br />A taxpayer who purchases a downloaded version of tax software to use on his own machine to assist in preparing his tax return does not have to share any information with the software company UNLESS he efiles the return, in which case all information passes through the software company.<br /><br />So the new NYS tax law forces taxpayers who would prefer not to share their information with a third-party software company to handwrite their own tax returns. This is likely to add transcription errors to the process for those taxpayers who decide to handwrite their tax returns.<br /><br />I understand that filing a paper return does cost the state a little bit more to process (but probably not all that much, given the 2-D barcode) and I believe some taxpayers would be willing to pay a small fee to cover that cost in exchange for the privilege of keeping their financial information out of the hands of software companies. (Such taxpayers already pay a significant amount to the Post Office, which surely helps with their mounting deficit problems.)NY taxpayernoreply@blogger.com