John M. Hoffman CPA

The Efile Process

I thought it was about time to explain a bit about this wonderful thing for tax filing known as efiling.

Efiling is not optional. As a professional tax preparer the tax authorities (IRS and most states) mandate that I efile (whenever possible) the tax returns I prepare.

Like many changes in life, there was some resistance to this concept at first but once we have gotten used to it, everyone loves it.

The efile process eliminates taking your return to the post office and making sure it has sufficient postage etc. More importantly, it eliminates the process of someone at the other end (at the IRS and also each state revenue agency) from having to reprocess the material by essentially entering much of the return data into their computer. Instead, my tax software and that of the tax authorities know each other such that when I click the mouse and send to them, they accept the return into their system without paper.

At my end the return goes through many internal checks to make sure it is ready and all the T's are crossed and I's dotted. For example, I can not efile a return that has greater than $500 non-cash gifts to charities without complete information about that gift (places life Salvation Army) .This internal double check is a wonderful thing because it helps to assure that your tax return is ready to go before I give you your copy.

Once I give the return to you, the process is not complete until you review the return and then sign and return the efile authorization forms to me.  I can't simply be filing people's tax returns. The efile authorization form is you telling me "the return is good to go, please give it to the tax authorities".

In the old days when you signed the return, put postage on the envelope, and dropped it in that blue U.S. Post Office box, your return was filed. NOT SO ANYMORE. When you sign the efile authorization form and drop that in the mail to me, your return is not filed. Not until I receive the efile authorization form and actually click that mouse to transmit to the tax authorities has your tax return been filed.

What about payments you may wonder. If you are paying by check, you can efile the return any time before April 15 and drop that check in the mail in time for the tax authorities to receive on April 15 and the tax authorities will match up the payment to the return and both your filing and payment are timely. Does that mean that we can efile your return on March 1 and you can send that large balance due on April 1 and everything is just fine? ABSOLUTELY. Does that mean that if you e-file your return on March 1 with a balance due that will be debited from your account, that amount won't come from your account until April 15? ABSOLUTELY (unless you designate an earlier date).

Since the e-file process has been fully integrated (meaning both us accountants and the tax authorities have gotten used to it), the number of errors and discrepancies at the tax authority end have greatly diminished. Keep in mind that part of the IRS compliance work is to cross check items of income that are reported to them against your return. If you have dividends from IBM in the amount of $200, IBM has told the IRS and the IRS wants to make sure that is on your return. If someone at the IRS had to manually enter each item of income from your return, perhaps they punched that dividend in as BMI and now there appears to be a discrepancy. Well that problem is generally a thing of the past. I can only imagine the savings at the various tax authorities from this process.

For the taxpayers refunds are processed more rapidly and discrepancies identified more quickly.

So what can go wrong and why does Hoffman "freak out" about getting these things done with so much room to spare? LOTS can happen:

What if there is a rejection of your return from the tax authorities? We need time to resolve any items of discrepancy and resubmit. Items of discrepancy are few but do occur.

What if John has a power outage or an internet outage on the island that he works from? This has happened and one time I was without internet for 3 days. Without power or without internet I essentially can not do anything and the clock keeps ticking.

So - don't forget that your return is not filed until I get those signed efile authorization forms and have successfully transmitted to the government. Also don't forget that your efiling of the return is independent of the payment process. If you direct tax authorities to debit your account, that request is part of the efile process but does not necessarily happen at the same time.

Any questions, as always, don't hesitate to ask.