ELECTRONIC FILING FAQ

  About a month ago, we informed you that for this coming tax season, we have enrolled in the Electronic Filing Program with the IRS and the respective states. Here is some additional information about this change to help explain what electronic filing is, and what it means to you.

What is electronic filing?

Electronic filing, or eFiling as it is now called, is the sending of your tax return to the Internal Revenue Service and your State revenue office via electronic transmission over secure and encrypted communication lines.

What does the process of electronic filing mean to me and what will I do differently?

Basically, everything will remain exactly the same, except the way the IRS and the State revenue office gets your tax return. The way you provide your data to us and the way we prepare your returns will remain the same. In the past, you manually signed and mailed your “paper” income tax returns using the U.S. Postal Service. Under the eFile mode, our office will send your “tax return” to the Internal Revenue Service and your State revenue office via electronic transmission. Thus, it will eliminate one step for you out of the usual filing process. The finished tax package you receive from us will contain the usual copy of the entire return for your files, but there will not be any copies in the package for you to sign and mail. Instead, there will be a one page form authorizing us to electronically transmit your income tax returns. You will need to sign that form authorizing us to “send” your returns.

What about security of my information?

One of the cornerstones of our philosophy is to always treat your personal financial information with the utmost confidentiality. Before switching to the eFile mode, we had to reach a level of confidence that our client's personal financial information would continue to remain secure at all stages of the eFile process. We have evaluated the process and have determined that eFiling does not pose any threat to the security of our clients' personal financial information.

From the IRS website on the question of security, “More than 460 million tax returns have been filed electronically since 1986 with no security incidents. The eFile system has many built-in security features, employs multiple firewalls, uses state of the art virus and worm detection, meets or exceeds all government security standards, is constantly tested for weaknesses by penetration testing, and all Internet transmissions will use SSL (Secure Sockets Layer) encrypted security measures.”

Based upon this information and similar declarations made by the various states, we feel that eFiling will pose no threat of infiltration of your personal financial data. For 2003, approximately 61.5 million returns were eFiled and a 16% increase is anticipated for tax year 2004.

What is the additional cost to eFile?

Our tax software vendor charges us only a nominal additional fee to use their software to eFile each of our returns. Also, the anticipated time to be dedicated to your work should be similar to past years. Thus, we do not anticipate any additional charges will be incurred by you specifically due to your return being eFiled.

What are the benefits of eFiling?

It would be a falsehood to say that eFiling originated as a benefit to the taxpayers. Obviously the IRS and the state revenue offices primarily benefit from the eFile Program in that they do not have to handle, nor clerically input all of the eFiled returns. However, there are some indirect benefits that are made available to you as a result of eFiling your income tax returns. Your returns will not be required to be input by revenue personnel, thus eliminating those potential IRS input errors we see from time to time. Tax refunds which are direct deposited to your bank account will be received in a few days rather than weeks. There is increased security of your data in the eFile system over the old mailing system. We will receive proof of date of acceptance of the returns. You will be able to use the new and easier ways to pay your tax balance due and your quarterly estimated tax payments. And lastly, if there is a problem with your return, it will be much easier for us to communicate with the IRS about it on your behalf.  

What authorization do you need to “send” my returns to the IRS?

The finished tax package you receive from us will contain Form 8879 authorizing us to electronically transmit your income tax returns. You will need to sign and date that form authorizing us to “send” your returns. If you are filing a joint income tax return, both spouses will be required to sign and date the Form 8879. Before we can transmit your return, our office must have that signed 8879 in our possession. You can return it to us by personal delivery, mail, or even fax.

What method do you recommend for receiving a refund?

If you are due a refund, there are two methods of receiving that refund. One is having the IRS (or State) issue an actual check, and sending it to you via the good old U.S. Postal Service. The second method is to have the refund direct deposited to your bank account. The difference in time between the two methods is about 8 to 10 days. Direct deposit refunds will take about 10 days and check refunds will take about 20. Our office highly recommends the use of the direct deposit method over the check method for several reasons. The direct deposit method is the most secure, most convenient, and fastest method to receive the refund to which you are entitled. Plus, there is no additional cost for using the direct deposit method.

Some folks might be shy about giving IRS your bank account number to direct deposit the refund to. Be advised, that the long arm of the IRS has had your bank and bank account number long before you even file your income tax returns. The banks are required to give them this information as a matter of annual reporting.

If I owe a tax balance, how do I pay it?

When you electronically file, there are three ways to pay any balance you may owe with your 2004 income tax return.

First, you can still use the basic method of sending a check with a payment voucher as you have done in past years. Your check and payment voucher will catch up with your eFiled income tax return. If you choose this method, we will provide you with a payment voucher in your tax package which will instruct you to write your check and send it with the payment voucher before the due date of the income tax return.

Second, you can pay with the use of your credit card. However, we highly discourage this method because of the fees charged by the credit card companies. This is an economically impractical method to pay your taxes and would only recommend it in the most dire of situations.

Third, you can authorize your bank to make a withdrawal from your bank account and pay the IRS and your State directly. This would set up when your return is electronically filed. You can even preauthorize a future date for your taxes to be paid, i.e. April 15th. Also, another nice feature about this option is that you can even set your next year estimate payments up for preauthorization payment withdrawal on the due dates. However, and a big however, your only responsibility is to make sure the funds are available in your account on the date you specify for the payment withdrawal. As mentioned above, some folks might be shy about giving IRS your bank account number for automatic payment of taxes. Again, it should be no mystery that the IRS has long had your bank account numbers before you even file your income tax returns. The banks are required to give them this information as a matter of annual reporting.

Which method is best method? It depends. The preauthorized automatic debit to your bank account is the most convenient, and the one we recommend. But you must remember to have the funds in the account you specify. If there is any doubt, then in turn we must recommend the check and voucher method.

Electronic Filing Ineligibility

For one or more of a variety of reasons, we have determined that you are not eligible to eFile your returns, or we have determined that it is in your best interest not to eFile your returns. Certain forms can not be eFiled. Certain situations preclude the use of eFiling. Lastly, if we feel certain documentation should accompany your return to help explain or support a deduction, we will choose not to eFile your returns. The person preparing your returns will have probably discussed the reasons with you during the tax preparation stage.

If you have any questions about the eFile Program, please do not hesitate to call.

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