State E-File Mandates

STATE E-FILE MANDATES

State e-file mandates continue to be a hot topic. Following is a list of current mandates.

Preparers who prepare more than 50 individual income tax returns, and use tax preparation software, must file all returns using electronic means. 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.

As of January 2004, 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.

As of January 2007, Connecticut legislation requires preparers who prepared 100 or more income tax returns in the previous calendar year to file all personal income tax returns electronically.

Starting in calendar year 2008, 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.

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) As of January 2006, 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) As of January 2004, 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 TaxWorks software.

(1041) As of January 2005, 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) As of January 2005, 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) As of January 2005, 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) As of January 2005, 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.

(1040) As of January 2004, preparers who file 200 or more income tax returns in a calendar year must e-file all individual income tax returns.

(SBT) Single Business tax returns must be filed electronically. The mandate applies to individual and business returns with $350,000 in gross receipts. Michigan will allow certain waivers. Form 8030 can be filed electronically. 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.

(1040) Preparers who prepare 50 or more NJ income tax resident returns are required to file electronically All EROs must register with the state of New Jersey. The registration form is located at http://www.state.nj.us/treasury/revenue. Select Forms and complete the ELF Registration.

(1065) As of January 2003, New Jersey partnerships with 10 or more partners are required to e-file their returns. This can be done through the New Jersey website.

Starting in calendar year 2008, 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.

As of January 2007, preparers who prepare 100 or more individual returns in any calendar year are required to e-file. This mandate dropped from 200 in 2006 to 100 in 2007. A penalty of $50 per return will be assessed the tax preparer for each failure to electronically file a return. The fee will be waived if it is shown that such failure is due to reasonable cause and not willful neglect. Reasonable cause includes, but is not limited to, a taxpayer’s election to not electronically file his or her return.

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.

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.

As of January 2004, 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.

As of January 2007, preparers who prepare more than 100 individual returns in any calendar year are required to e-file.

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.