Sunday, April 10, 2011

New York leads the way? Efile mandates for self-prepared returns too!



You know how the New Hampshire license plates have a tagline that reads: "Live free or die." Maybe New York State should have a tagline "Efile or die"--well, that's really too strong, but "Efile or pay a fine" is not snappy enough to fit on a license plate.

Efile mandates for paid tax preparers are nothing new. New York State started requiring them last year, and the IRS has begun requiring tax pros to efile federal returns also. (With a few exceptions for adamantly artisanal professionals like the Wandering Tax Pro.)

But New York State recently decided to go a step further and apply the mandate to do-it-yourselfers as well: starting in September of this year, New York State taxpayers who use tax software to prepare their own returns, even without a tax pro, MUST efile them.

Albany Times Union reporter Rick Karlin posted a link to the NYS Tax Department's Summary of Tax Provisions in the newly enacted 2011-2012 budget, which was passed in the wee hours of the morning March 31.

Check out page 2 of that document:

Part U, Sections 13 through 17-b, of Chapter 61 of the Laws of 2011 create several changes to the requirements for electronic filing of tax returns.

If a tax return preparer prepared more than five original tax returns during any calendar year beginning on or after January 1, 2011, and if in any succeeding year that preparer prepares one or more returns using tax software, then all tax documents prepared by that preparer must be filed electronically. ...

If a taxpayer does not use a tax return preparer, but instead prepares its income tax return using tax software, those returns must be filed electronically.


Ahem, first off, I am not too thrilled with the New York State Tax Department's choice of pronouns: "its income tax return," indeed! Taxpayers who prepare their own returns, with or without software, are not neuter! A better way to express this: "Taxpayers who use tax software to prepare their own returns must file those returns electronically."

Taxpayers who refuse to comply with the efile mandate for self-prepared returns will face fines of $25, unless they can show their paper filing was due to reasonable cause. Professionals who violate the mandate are subject to a $50 fine. Also, taxpayers who violate the mandate can be denied interest to which they might otherwise be entitled on late refunds.

I don't know about this particular policy.

There are lots of taxpayers who currently use software to prepare and print out nicely formatted and legible paper returns with some degree of arithmetic and logic checking as well as scannable 2-d barcodes that make those returns easy to process.

If this policy goes into effect, then those New York taxpayers who are adamantly opposed to efiling will no longer use software. Their returns may be less legible, may have more transcription errors, and certainly will not have 2-d scannable barcodes.

Interestingly, the provision will not go into effect if voluntary efiling exceeds 85% this year. So, if most New York returns get efiled, a small minority of dyed-in-the-wool semi-Luddites who "v-code" their tax returns will be allowed to continue to do so without incurring penalties. (The term v-code refers to the practice of filing a paper return prepared using tax software.)

1 comment:

  1. Does anybody know if e filing exceeded 85% per below? thanks


    "the provision will not go into effect if voluntary efiling exceeds 85% this year. So, if most New York returns get efiled, a small minority of dyed-in-the-wool semi-Luddites who "v-code" their tax returns will be allowed to continue to do so without incurring penalties. (The term v-code refers to the practice of filing a paper return prepared using tax software.)"

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