Many Happy Returns

The IRS wants to usher in the era of E-filing, but going paperless won't be easy.

Reportedly, the IRS is working with the Federation of Tax Administrators and 26 state tax agencies on a joint project to develop a new federal/state E-filing system. “Each state has its own intricacies on how to file [electronically],” says Robert A. Mathers, national director of tax services at Clifton Gunderson LLP. “It’s an increasing burden for any accounting firm that has multistate returns for companies.”

In the meantime, here’s one other potential complication to ponder: while the IRS says otherwise, it’s no dead certain lock that the agency’s computer network will be able to seamlessly process 11,000 electronic tax forms come September 15. If it can’t, officials at the agency may want to consider applying for one of its own hardship waivers.

Craig Schneider writes frequently about accounting and tax issues.

Paperwork Reduction Act?

The IRS plan for E-filing

Who?

Corporations with assets of at least $50 million and 250 or more returns each year (total includes income tax, information returns, excise tax, and employment tax returns).

What?

Internet submission of corporate tax returns (1120 and 1120S). Each form included in a return should be attached as a separate PDF file. The total tax return cannot be larger than 1 gigabyte (5,000 PDF pages), and no individual attachment may exceed 50 megabytes (500 pages).

When?

Due September 15, 2006 (for tax period ending on or after December 31, 2005).

Who Else?

The IRS has been working with the Federation of Tax Administrators and 26 states on a joint project to develop a new federal/state electronic filing system. Currently, only Massachusetts requires E-filing; more are expected to follow suit.

Source: Internal Revenue Service

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