In one technology arena, Mississippi is ahead of the pack. When it comes to electronic-filing (e-filing) of income tax returns, nearly half of Mississippians filing personal returns are on board.
Nationwide 130 million individuals filed income tax returns, with 47 million e-filing. About 45% of the 1.2 million residents of Mississippi filing tax returns, 545,000 people, e-filed their taxes for 2001. That compares to the national average of 36%.
“We would like the number of e-filers to be closer to the 1.2 million,” said Emma Moore, IRS media relations specialist for Mississippi.
The IRS is promoting e-filing as being quicker, more accurate, the best way to confirm the IRS has received your return and the fastest route to a refund. E-filing saves both taxpayers and the government money.
“About 99.9% of my returns are filed electronically,” said Hogan Allen, CPA, Eubanks & Betts, CPAs, Jackson. “This was the third year the IRS has offered e-filing. It simplifies filing. You don’t have all the returns to sign and mail. It reduces paperwork significantly. You only have to sign an authorization form, and return that to me.”
Allen said e-filing reduces the time clients have to spend with him. E-filing increases the speed of receiving a refund. And, if you authorize direct deposit to your bank account, that also gets you your money back quicker.
“E-filing has been very popular with clients,” Allen said. “The benefit to me is the reduced paperwork at the office. It has been a real benefit, particularly since the IRS has expanded their ability to handle various types of returns. Three years ago there were a variety of types of returns they couldn’t process. But this year I haven’t come across any that were disqualified. Those are rare.”
And this year the state revenue service has increased its ability to handle out-of-state returns. Before non-resident returns had to be manually filed. This year many states, including Mississippi, have increased their ability to accept non-resident returns filed electronically.
The benefits for tax preparers include reduction of the time required by the clerical staff to copy returns. Allen said copying costs are reduced by half to two-thirds. The only added paperwork burden is that clients must sign authorizations for the federal and state government returns.
“We are not allowed to file the return until we receive their authorization,” Allen said. “On April 15, the due date, that can be a problem if you have not stayed on top of things getting the authorizations signed. I’ve been able to handle that without difficulty.”
Although partnership returns can be filed electronically, Allen hasn’t had many clients request that. “But I expect that to increase in the future,” he said.
Amy Carter, an accountant/tax preparer at Strojny & Strojny, Ocean Springs, said the e-filing came about as a result of the Reduction in Paperwork Act. Like Allen, nearly all of her clients choose to e-file.
“The IRS this year has asked us to do paperless returns as much as possible,” Carter said. “The nice thing is the IRS doesn’t need paperwork at all unless there is a discrepancy and more documentation is needed. The beauty of e-filing is we only need one form signed by clients, with their W2 attached, which is saved for five years. We can print a copy if they need a printed version.”
Carter said e-filing cuts down on mistakes and lost records.
“Once upon a time you would mail in your return thinking it was being handled very carefully,” Carter said. “But when it went through the mail sorters, there could be papers flying everywhere. Then you would get weird letters from IRS asking, ‘What is this? What is that?’ E-filing is a much more accurate way of filing. I’m not saying there is never any confusion because occasionally there is. But for just your regular everyday Joe, it is the best way to go.”
Few taxpayers can’t use e-filing. One exception is the death of a taxpayer. In that case, a death certificate must be provided.
“Otherwise we encourage as much e-filing as possible for personal returns,” Carter said. “Most corporate returns are paper, but small business owners can use e-filing. Many corporations prefer paper returns. They often ask for extensions in the filing deadline. Then it is easier just to file a paper return. However, we can e-file all the way through October 15 rather than April 15 being the end of e-filing.”
Storage headaches for tax preparers has been greatly reduced. Instead of stacks and stacks of files, most of the records are stored on disks.
“If it does nothing more than reduce storage problem, it is a pretty big deal,” Carter said. “We also talking about postage and handling costs. There are so many options now. People who want refunds back quickly are able to do it in a more timely manner than ever before. Funds can be direct deposited into checking account. You don’t have to worry about checks lost in the mail. That is a real pain to go through the process of finding a lost check.”
The Treasury Department, Office of Management and Budget (OMB) and the Internal Revenue Service (IRS) have launched a new Web site featuring private-sector partners that will allow most taxpayers to prepare and file their taxes online for free. A substantial majority of citizens will be eligible to use this service at www.irs.gov or through www.firstgov.gov.
The government has made Free File possible through a public-private partnership with a consortium of tax software companies, the Free File Alliance, LLC.
“No one likes paying taxes — it’s too confusing and time consuming,” said Acting Treasury Secretary Kenneth W. Dam. “The launch of this new Web site is great news for millions of Americans. Free File makes it easy. Now they can save time, money and get their refunds in half the time by filing their taxes online for free.”
Each Free File Alliance member company sets taxpayer eligibility requirements for its own program. These requirements will differ from company to company. Generally, eligibility will be based on factors such as age, adjusted gross income, state residency, military status or eligibility to file a Form 1040EZ or for the Earned Income Tax Credit.
The agreement requires the Alliance, as a whole, to provide free services for at least 60%, or 78 million, of the nation’s taxpayers during each filing season. As of Jan. 16, 2003, the industry has exceeded that requirement. The number may fluctuate throughout the filing season as alliance membership and offers change. The primary candidates for Free File are those taxpayers who prepare their own taxes and still file paper returns.
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org</a.