JACKSON – In the 1998 IRS Restructuring and Reform Act, Congress established a new mandate for the Internal Revenue Service, according to Paulette Windon, electronic tax administration coordinator for Alabama, Mississippi and Louisiana. The legislation’s goal is for 80% of all tax returns to be filed electronically by 2007.
Several new rule changes and IRS initiatives aim to increase the numbers in Mississippi and nationwide of businesses filing payments and returns electronically so that this goal might be reached.
For businesses filing Form 941, the Employer’s Federal Quarterly Tax Return, three electronic filing options are available this year, according to Windon. No businesses are required to use these programs yet, but the IRS is heavily marketing them to the business community. Electronic filing of Form 941 via magnetic media is still used by many businesses, but 941 TeleFile and 941 Online are new options.
Only filers selected by the IRS can use 941 TeleFile; those businesses will receive a special TeleFile packet with instructions and paperwork to use the touch-tone phone system piloted since April 2000 in the Southeast (including Mississippi). This packet is sent to eligible filers per quarter, according to Windon, and includes businesses that file monthly, have been in business for 12 months, have a balance due of $1,000 or less, and have not changed their corporate name or address in the past year, among other requirements. Businesses cannot participate unless the IRS selects them.
Beth Burgess, CPA, president of Crowell, Hart, and Company in Jackson, said her clients are not in any hurry to volunteer to file electronically in any fashion.
“We used to e-file when it first started, and it was an administrative nightmare, “ Burgess said.
Most clients that request electronic filing are individual filers who are due large refunds, according to Burgess.
941 Online can be done through a new Web-based provider this year, according to Windon: C&S Technologies. C&S Technologies allows business filers to either fill out the Form 941 online or download the eSmart Form 941 from www.esmartpayroll.com, complete it on the business’ computer, and e-file the data online.
Filing online with C&S Technologies is $3.49 per 941 with a volume discount, according to the IRS Web site (www.irs.gov).
To be able to file Form 941 online, businesses must request and return a letter of application at the online site three and one-half months before the end of the quarter that they wish to begin online filing. In order to qualify for the quarter ending March 31, 2001 applications had to be processed by Dec. 15, 2000.
Bill Thames, CPA, of Thames and Associates had planned to offer e-filing to his firm’s clients this year because he bought out a practice that did offer e-filing of business tax returns, but was “late getting into it,” he said.
In his case, the application process took 30-60 days, and he did not get the PIN numbers that are supplied to the users to serve as the electronic signature of the filers.
“When e-filing started in Mississippi, we had a lot of problems. CPAs have shied away from it and are just now getting back into it,” he said.
Susan Thames of Thames and Associates put it more bluntly: “They’re (the IRS) going to have to get a lot better at it.”
Although e-filing is not a popular option, electronic data transfer of tax deposits is gaining in popularity, according to Windon.
Some businesses that used to be required to participate are no longer under a mandate to do so; however, paying the taxes electronically is still very popular — three million taxpayers use the service, according to the December 2000 SSA/IRS Public Information Bulletin.
The small-business community lobbied in Washington to increase the amount of total business tax deposits requirement for required participation in EFTPS, according to Windon; if a business made total deposits of $200,000 in 1999, they must begin using EFTPS; that amount was raised from $50,000 effective Jan. 1, 2001. But it has not lessened anyone’s enthusiasm for the program. “Most businesses that use it love it. It’s a totally paperless system,” Windon said.
Susan Thames agreed. EFTPS can be performed over the phone, using EFTPS-Direct on a PC or by bank draft at a participating financial institution.
“Businesses can decide when the money is taken out, when to call and file the information — they control the system there,” said Thames.
Contact MBJ contributing writer at Julie Whitehead at email@example.com or (601) 364-1018.