Task Force Meets to Discuss Shift to Electronic Filing

By Kate Prouty

A New York State Society of CPAs task force met last month to address issues many practitioners are facing with the Internal Revenue Service’s growing promotion of electronic filing for both state and federal returns. IRS e-file allows practitioners to electronically file tax returns over the Internet, promising fast refunds, increased accuracy, a completely paperless tax return and proof within 48 hours that the tax return has been accepted. But is it all just a mouse click away?

Many practitioners remain hesitant to make the full transition to electronic filing. For this reason, the NYSSCPA Tax Oversight Committee last year created the task force, which has met several times since. The April 23 meeting focused on working with Ellen Murphy, IRS director of taxpayer education and communication for New York state and New England, to brainstorm ways to work with the Service to establish educational programs that will help ease the transition. The task force is looking to the IRS to contribute its expertise and create contacts with vendors and possibly an insurance company as part of the effort to educate practitioners on e-filing.

For the last few years, the IRS has been increasingly committed to promoting their new e-file system. Mostly through advertising, the Service is sending the message that e-file is the way of the future. And although it is not there yet, upcoming tax seasons are sure to see more and more practitioners trading in paper for the Internet. Nonetheless, sources in the industry commend the IRS for easing into the transition to ensure all practitioners are in fact ready to embrace the future of tax returns.

Once a certain comfort level with the new system is reached, there are real cost-savings advantages that make e-file a desirable process. This is true especially in Manhattan, where firms will save on the money it costs to store paper records. Although storage is not as big of a concern in upstate New York, practitioners throughout the state will save on the costs of postage and paper.

The Flip Side

Regardless of these financial gains, e-file has its issues. For one, sources in the industry feel that, despite IRS promises to the contrary, there are very serious privacy concerns. Using the various e-file providers introduces liability exposure, technological glitches and questions about practitioners’ responsibility to create and maintain records of their electronic actions. Furthermore, the IRS has a long way to go before New York state filing is on par with federal filing. And because it is desirable to file state and federal returns in the same way, either both through paper or both electronically, it will take some time before many practitioners make that full transition.

Maryann Winters, chair of the Society’s e-file task force and partner at Baasch & Winters CPA P.C., chose to file 24 out of 400 returns electronically this year. Although she recognized certain efficiencies with the electronic process, she also was wary of real problems that remain unaddressed. New York state filing is far from equivalent with federal filing; forms for clients with long-term care insurance cannot be processed electronically, for example. Restrictions like this one keep the online tax program in its initial stages, waiting to be completely implemented into practitioners’ annual tax season routine.

By embracing the proven advantages and addressing the potential problems of e-file, the task force aims to make education a top priority so that in the near future the needs of both the IRS and practitioners will be met by clicking a mouse instead of by licking a stamp.