IRS E-filing on the Rise

By Stephanie R. Myers

Electronically filing one’s taxes with the Internal Revenue Service took a sharp jump this year, according to the IRS Web site.

IRS figures indicate that, for the first time, electronic filing likely surpassed the amount of paper forms that were mailed to the IRS.

E-filing, direct deposit and electronic payment plans jumped 8 percent from last year, tax officials with the IRS said. The IRS has encouraged e-filing as a way for taxpayers to get a quicker refund than those who choose to file a paper tax return.

Additionally, New York state is requiring tax return preparers who prepare more than 200 returns to e-file next year if they use tax software.

Mark Levin, a member of the Society’s Tax Division Oversight Committee and immediate past chair of the New York, Multistate and Local Taxation Committee, said the e-filing requirement may or may not make things easier for tax preparers.

“It depends on whether they e-file now at all and what software they use,” he said. “This doesn’t apply to (those) who do not use software. But if a preparer uses software for even one return, then all returns must be filed electronically.” This provision hinges on the preparer falling under the other qualifications, Levin added.

Levin also said that the state’s definition of what electronic filing is is broad-based.

“New York state came out with 2D bar codes which contain all pertinent info on the New York state return,” he said. “Some software companies are producing them, some are not. But if you look under the definition of electronic, any return filed with that 2D bar code sheet up front will be considered e-filed, even though it’s mailed. This provision, however, is transitional and good for 2005 only.”

Some CPAs are finding that e-filing is easier for both taxpayers and CPAs who file their clients’ returns for them.

“E-filing is wonderful,” sole practitioner Ed Torres said. “I did about 100 more than last year. I expect that the trend will continue as people find out how much easier it is to e-file.”

Torres, who began e-filing for clients when it was first offered in the early 1990s, said that while one can make mistakes on printed returns that won’t be caught by the IRS until it is processed, e-filing typically catches the mistakes prior to submission.

“On a printed return, if you transpose numbers or letters, it will go out,” he said. “Now, it gets blocked with e-filing.”

Clients have been quick to adapt to the e-filing method, Torres said.

“Many of them had never e-filed before, and I think the most surprising thing was that they didn’t have to mail anything,” he said. “It’s almost seamless.”