Over the years, CPAs and other professional preparers have had the pressured screws to force e-filing upon taxpayers, including many states that have mandatory threshholds for businesses, particularly pass-thru entities (like partnerships).

Back in the 1990s during the Clinton Administration, much of the IRS’s “teeth” were filed and the feds put increased responsibility, under a provision referred to a circular 230, upon CPAs and professional tax preparers to enforce tax compliance or face significant fines — the circular 230 pressure has only increased and, not too surprisingly, franchises like H&R Block are not subject to circular 230. But I digress…

Anyway, many CPA and professional tax preparer firms do not charge for e-filing, even though we have had even more administrative compliance and mandates placed upon us via circular 230. We, CPAs and other professional tax preparers, recommend e-filing when it’s clearly in the best interest in the taxpayer (such as those anticipating a refund) or it facilitates the demand expectations of taxpayers because of the media hype for e-filing.

As for the e-filing lawsuit, I cannot opine about the cost structures — I know technology has been tricky. For example, I purchased a desk top computer for $4,200 in 1988, and a 500 gb Dell XPS for $1,700 in 2006! The cost of technology is, historically, front-loaded!

The current IRS “Free E-Filing” initiative, using the “Free File Alliance”, is a joke.

Even if you are lucky enough to qualify for the free service it is provided by profit-making companies, such as Henry and Richard (H+R Block). The free-file page on the IRS website will take you to the website of the free preparer. I have no doubt that the likes of Henry and Richard will try to squeeze money out of low-income taxpayers via Refund Anticipation Loans and other high commission/high fee products.

(1) The IRS should not be endorsing the services of particular tax preparation companies, as it does implicitly if not directly by including them in this process.

(2) If the IRS wants to provide free electronic filing it should follow the example of New Jersey’s “NJWebFile” program (a rare occasion where anyone should follow the example set by the State of New Jersey). Qualifying taxpayers (the qualification has to do with the information to be submitted and not the income level of the taxpayer – i.e. if you have a Schedule C or income from a partnership or Sub-S corporation you cannot use NJWebFile) can go to the NJ Division of Taxation website and file their return directly with the State of New Jersey.

In 35 tax seasons I have never filed a federal tax return for a client, or for myself, electronically because I have never used tax software to prepare a return (all 400 of my federal returns are prepared by hand – I use NJWebFile for NJ resident returns if I can and if there is a refund). I will only file federal returns electronically if the IRS had the equivalent of NJWebFile.

The Wandering Tax Pro