Dear Commissioner Shulman:
I can understand why the Internal Revenue Service wants all returns eventually submitted electronically, and why Congress chose to require all return preparers to do so beginning with 2010 returns filed in 2011.
Electronically submitted returns cut down substantially on IRS processing costs. There is no longer the need for a “middle-man” data entry clerk to enter information from paper returns into the IRS computer system.
Electronically submitted returns also reduce human error. Since the preparer of the return is basically entering the information directly into the IRS system one avoids the potential for errors made by the “middle-man” IRS data entry clerks.
I am not against electronically submitting income tax returns. I do so with many NJ state income tax returns via NJWebFile. I can go to a site within the NJ Division of Taxation portal and directly enter the information that normally would have been presented on the NJ-1040.
The problem with the NJWebFile system is that is has too many limitations and conditions. I cannot submit NJ-1040s that report income from self-employment, either from a federal Schedule C or a K-1. There are also limitations in the number of source information returns that can be entered. When using the NJWebFile system you do not merely enter NJ-1040 line totals, such as total wages or total interest or total dividends. You enter the information from each W-2 or 1099 separately.
In 39 tax seasons I have never used flawed tax preparation software to prepare federal or state individual income tax returns. I have no intention of starting now. I am not going to spend thousands of dollars each year, resulting in higher fees to my clients, on the initial purchase and annual update of tax preparation software.
It is my understanding that currently in order to submit federal income tax returns electronically one must use flawed tax preparation software and enroll as an Electronic Return Originator (ERO).
I will gladly comply with the Congressional mandate for electronic filing as long as I can do so at no additional cost to me, or my client, via the IRS website.
The IRS had made attempts at an online “free-file” program in the past, but its availability was extremely limited and it was done not directly by the IRS but via 3rd party contractors with conflicting profit motives.
I can understand the IRS requiring an enrollment and renewal fee for its new tax preparer registration regime. This is a minor amount that will be used to fund the program, which will provide benefits both to me as a tax preparer and the taxpaying public, as well as the Internal Revenue Service.
I do not see how Congress or the IRS can require me to spend thousands of dollars each year to purchase software to comply with this new requirement. And, if all tax return preparers are required to be registered, and all tax return preparers are required to submit returns electronically, there is no need for the additional step of becoming an Electronic Return Originator.
Will the Internal Revenue Service be providing tax preparers with a free method of submitting income tax returns online? Or will it force all preparers to choose to either purchase expensive, flawed software or request that their clients OPT OUT of electronic filing?
Thank you for your cooperation.
Sincerely yours, Robert D Flach
So what do you think?