Do e-services work?

Federal and state governments have found that receiving tax returns electronically is far less expensive than processing paper ones. With budgets being strained, governmental agencies have been strongly encouraging electronic filing (e-filing).

The states have encouraged it by requiring it in certain circumstances. For example, Massachusetts requires e-filing and e-payment of all taxes of existing corporations, partnerships and fiduciaries that meet certain income thresholds; see MA Taxpayer Information Release (TIR) 05-22. Practitioners who prepare 100 or more individual tax returns must e-file; see MATIR 04-30. Other states are not as comprehensive in their requirements, but are definitely moving in that direction.

While the states have been taking a "stick" approach with their mandates, the Federal government has taken the "carrot" approach, by offering e-services for practitioners. Tax advisers who file five or more electronic individual returns over two years may apply for e-services, making resolving issues with the Service much easier; see "IRS e-file Application Updates," at www.irs.gov/ efile/article/0,,id=98246,00.html.

Practitioners who do not yet use e-services should consider e-filing Form 2848, Power of Attorney and Declaration of Representative; resolution of account disputes; and account access.

POAs

The power of attorney (POA) process has proven to be extremely frustrating, both for clients and practitioners. When dealing with paper fillings, tax advisers will complete a POA for a client and fax or mail it. The Revenue Agent or Officer may not be aware of it, so it is often necessary to fax him or her another copy. (It is not uncommon to need three or more POAs before an issue gets resolved.) With e-filing, the completed form (once accepted) is posted directly to the Central Authorization File (CAF) within 45 minutes. Any agent or officer can access the CAF and become aware of the POA on file, saving an enormous amount of time and frustration.

The first few filings using the e-services POA application may require some extra time; for security reasons, the Service requires some extra information before the application is accepted. To save time, the client's most recent tax return, along with his or her date of birth, should be available, as it is needed to ensure that the proper taxpayer is identified. One way to accomplish this easily is to fill out the POA by hand, fax it to the client for signature and have it faxed directly back; from start to finish (i.e., from the first phone call to the client to having the POA on file), the process can usually be completed in less than an hour.

Another issue arises when representing divorced spouses. When a taxpayer has previously been associated with another taxpayer, the identical information needs to be provided as to both the taxpayer and the spouse. If the information is included in both areas, the POA will be accepted on the first try.

Once the POA is posted on the CAF, it is advisable to obtain a printout of the appropriate account statement, to avoid going through the time-consuming process of getting the same information through the Practitioner Hotline. The same client identification information as for the POA is needed, and so should be kept close at hand. If all that is needed is a few account statements (such as the charges and credits for a particular year, to see what happened to a particular payment), the account statement can be printed out immediately. Similarly, the process is expedited if all one needs are several quarters' worth of Forms 941, Employer's Quarterly Federal Tax Return.

Account Resolution

When a problem is easily explainable, the account resolution section is very useful. If the issue is a misapplied payment (such as a Form 941 issue), an e-mail will trigger notification of a fix within two days. If done by mail, it may easily take eight to 10 weeks to resolve the same problem. When the issue requires substantial explanation or copies of documents to resolve, the Practitioner Hotline is still the best bet, as it allows the opportunity to explain a position and fax the needed substantiation. While this probably means that it will take six weeks before a paper copy of a resolution is received, it is still the best way to deal with more involved problems.

Conclusion

The bottom line is that e-services work. They can expedite a lot of functions that previously took weeks to accomplish. If not yet registered, tax advisers should sign up and give them a With just a little practice, they provide an alternative that may save a lot of time.

FROM LAWRENCE H. CARLTON, CPA, CARLTON & DURAN, CPAs, EC., BEDFORD,