STATE E-FILE MANDATES
State e-file mandates continue to be a hot topic. Following is a list of current mandates.
Practitioners preparing 100 or more individual income tax returns, and using tax preparation software in calendar year 2005, must file all returns using electronic means in 2006 and subsequent years. In calendar year 2006, the threshold has dropped to 50 returns. Electronic means include electronic filing or printed returns with 2D barcodes. Taxpayers not wanting to electronically file must complete an additional "Opt-Out" form, Form EOO-Taxpayer E-File Opt-Out Election Form. This form must be completed and attached to the taxpayer's printed 2D barcode return.
Preparers who prepare more than 100 individual income tax returns during a calendar year are required to e-file all individual income tax returns. The preparer will be assessed a $50 penalty for each acceptable individual income tax return that is prepared using software and not filed by the preparer electronically, unless the failure to file electronically is due to reasonable cause and not due to willful neglect. The tax preparer would then not be subject to the penalty if the taxpayer elects not to e-file the tax return.
Connecticut legislation requires preparers who prepared 100 or more 2005 income tax returns to file all 2006 personal income tax returns electronically.
If you paid $20,000 or more in tax during Florida’s fiscal year (July 1 – June 30), you must electronically file and pay Florida corporate income tax.
The Indiana mandate requires paid preparers who file more than 100 individual tax returns in a calendar year to electronically file all Indiana tax returns. The e-file mandate does not include the part-year or non-resident forms or any return that the state cannot accept via efile. No opt-out is allowed for those required to e-file.
Preparers who prepare more than 50 Kansas Individual Income tax returns during any calendar year must electronically file a minimum of 90% of the returns. There is currently no opt-out provision. However, the mandate does not have a penalty for failure to comply with the electronic filing requirement.
Preparers who prepare more than 100 individual returns in any calendar year are required to e-file 30 percent of the returns due on or after January 1, 2008; 60 percent due January 1, 2010; and 90 percent due January 1, 2012.
(1040) Preparers who prepared 100 or more MA Forms 1 and 1-NR-PY during the previous calendar year are required to file electronically. Preparers must continue to file electronically in subsequent years unless they prepare no more than 25 individual income tax returns. Electronic payment of tax liability for e-file individual income tax returns is encouraged, but not required. Payment may be made with the e-file return or by the taxpayer through the DOR's website. The taxpayer may opt out of e-filing, but must file paper forms containing 2D barcodes.
(1040 Extension) Personal Income Tax Extension requests with no payment or payments of $5,000 or more must be made electronically. Extensions may be filed through the 1040Works software.
(1041) Fiduciaries filing Form 2 with total Part A, Part B, and Part C net taxable income of $50,000 or more must use electronic means to make any payments to the Department. Payments may be made through the DOR's website.
(1065) Partnerships filing Forms 3 and meeting the following income thresholds, loss thresholds, or with 25 or more partners, must submit all Forms 3 and Schedules 3 K1 by electronic means. Income threshold: (1) $50,000 or more in gross income, or (2) $100,000 or more received from the sale of stock and securities. Loss threshold: (1) $50,000 or more in ordinary loss from trade or business activities, or (2) $100,000 or more in losses from the sale of stock and securities.
(1120) All corporations subject to the corporate excise, including security corporations, with more than $100,000 in gross receipts or sales must file returns and tax payments using electronic means. Exception: financial institutions, insurance companies, and public utilities.
(1120 Extension) Corporate extension requests and accompanying payments must be filed electronically. Any corporation with more than $100,000 in gross receipts or sales must e-file. In addition, any corporation making a payment of $5,000 or more with its corporate excise extension, must e-file the request and make the payment by electronic means. Requests and payments can be made through the DOR's website.
Reference MA Mandate TIR04-30 on the MA DOR website at http://www.dor.state.ma.us.
A tax return preparer must file by electronic data submission all original Maine tax returns for individual income tax returns eligible for electronic filing. Exceptions: a) for TY09 the tax return preparer prepared less than 50 original Maine tax returns for individual income tax that are eligible for electronic filing; b) the tax payer refuses to allow the return to be filed by electronic data submission and the tax return preparer notes the refusal in the taxpayer’s records; or c) the tax return preparer has been granted a waiver from mandatory participation under section .05.
(1040) Preparers who file 200 or more income tax returns in a calendar year must e-file all individual income tax returns.
The Michigan Department of Treasury mandated electronic filing for both individual income tax and single business tax returns. Single Business Tax has been repealed for business activity after December 31, 2007, and replaced by the Michigan Business Tax (MBT) effective January 1, 2008. The e-file mandate for Single Business Tax is being continued for software developers supporting MBT, effective January 1, 2010, for the 2009 tax year. Reference Michigan's website at http://www.michigan.gov.
Preparers who prepared more than 100 individual income tax returns in the previous tax-filing season are required to e-file all individual income tax returns. Exceptions: (1) Joint returns where both reciprocity and Form M1NR are required to file; or (2) the SSN was used erroneously on a previously e-filed return. The preparer will be fined $5 per return for each return filed on paper.
All practitioners who prepared 25 or more TY08 returns will be required to file returns electronically.
Preparers who prepared more than 25 individual income tax returns in the previous tax-filing season are required to file all returns using electronic means. Electronic means includes electronic filing or printed returns with 2D barcodes.
Individual: If a practitioner files a total of over 100 returns for both individual and partnership, they must file all of their individual and partnership returns electronically. This means that if they filed 101 individual returns and only 1 partnership return, they must file all of their individual and partnership returns electronically. A $50 penalty applies to each return or extension that they fail to e-file, unless the taxpayer opts out of e-filing or they have other reasonable cause for failure to comply.
Partnership: Partnership and individual returns fall under the same New York Articles so the Partnership mandate is being combined with the individual practitioner mandate.
Corporate: The new mandate requires tax return preparers who meet certain requirements to e-file authorized tax documents beginning on or after January 1, 2009. The mandate also requires electronic payment of the balance due on any authorized tax document.
There are two parts to this mandate:
Part I – If a preparer prepares over 100 corporate business documents, then they must file their corporate returns electronically. The following are considered corporate business documents and figure into the threshold for the mandate: Estimated payments, Extensions, and Corporate return. So, the actual threshold could be as low as 17 corporate returns for a practitioner if they filed 4 estimated payments, the extension, and the return.
Part II – If a business files their own return and they use tax software that has been approved for corporate electronic filing, they must file their return electronically.
A $50 penalty applies to each document that they fail to e-file, unless the taxpayer opted out of e-filing or they have other reasonable cause for failure to comply.
The taxpayer will be subject to a $50 per tax document penalty for failing to electronically pay the balance due. The Department cannot abate the payment penalty for reasonable cause.
Preparers who prepared more than 50 individual income tax returns in the previous tax-filing season are required to e-file all individual income tax returns. There is an opt-out if the taxpayer indicates on the return that they do not want the return to be filed by electronic means.
Preparers who prepared more than 100 individual income tax returns in the previous tax-filing season are required to e-file all individual returns. The tax administrator won’t require e-filing by a paid preparer’s client who specifically requests that a return be filed on paper.
Preparers who prepared more than 100 individual income tax returns in the previous tax-filing season are required to electronically file all individual income tax returns.
A tax return preparer, or two or more tax return preparers affiliated together in the same establishment who prepare 101 or more individual income tax returns must submit all individual income tax returns electronically or use 2D barcode technology. Exceptions: Taxpayers who elect out of electronic filing or 2D barcode technology, returns that include a schedule that cannot be electronically filed or by 2D barcode, and undue hardship on the tax return preparer.
Preparers who prepared 100 or more individual income tax returns for a taxable year that began on or after January 1, 2004, must file individual income tax returns using electronic means or software that produces a 2D barcode. A waiver can be requested in writing to the Tax Commissioner clearly demonstrating the nature of the undue hardship to comply with the mandate.
As of January 2004, practitioners who prepare 100 or more WI Forms 1, 1A, WI-Z, and Schedule H are required to e-file individual income tax returns. Exception: WI returns on which the taxpayers write "no e-file" before their signatures to indicate they do not want to e-file the return.
Preparers who prepare more than 100 individual returns in any calendar year are required to e-file beginning January 1, 2007.
If you fall into any of the mandates and do not currently e-file, you are required to apply with the IRS to obtain an EFIN. Complete the application at http://www.irs.gov/pub/irs-pdf/f8633.pdf or use IRS e-services to fill out the application online.
