E-filing update: IRS modifies time for correcting errors, permits paper, PDF filing of some forms.

Tax Executives Institute continues to work with the Internal Revenue Service to iron out the chinks in the IRS's corporate e-filing mandate. Following two August conference calls with TEI's Forms and Attachments Task Group, the IRS announced that it will permit taxpayers 20 days (rather than the 5 days previously announced) to correct rejected e-filed Forms 1120 and 1120S. Thus, the IRS explained, if the return is rejected on September 15, 2006, the corporation will have until October 5, 2006, to successfully e-file the return. If the return is accepted by the latter date, the original date the filing was attempted will be considered the filing date of the return.

The IRS announcement marks a major step forward, according to TEI President Mike Boyle. The IRS's change of heart will make the rules for the mandatory electronic filing of large corporate returns more administrable. Mr. Boyle cautioned, however, that TEI remains concerned about the administrability of the IRS's corporate e-filing mandate. (TEI has met with the IRS on the e-filing mandate many times since the IRS announced its e-filing initiative last January; TEI has also filed written comments on the IRS rules and testified at a public hearing on the subject.)

Mr. Boyle commended the TEI representatives who have worked with the IRS to overcome the challenges and narrow the differences between what the IRS has mandated, what vendors can deliver, and what taxpayers should be required to do. "We may believe that the IRS has gotten ahead of the available technology in this field," he added, "but we are pleased with the progress TEI and the IRS have made to ensure a more workable result."

In addition to providing more time to correct errors, the IRS has decided that, at least for the first year of the mandate, taxpayers required to file more than 25 of 5 international forms will be permitted to file those forms on paper, in lieu of including them as part of the XML transmission. (This is a per form requirement; only the forms where the corporation has more than 25 will be eligible for the paper option.) The IRS also noted that 20 other forms will be permitted to be filed in PDF format (see "Forms Permitted to Be Filed in PDF Format").

Mr. Boyle stated that the IRS has also announced the following:

* In respect of Forms 8283, 8611, 8824, and 8861, if more than 25 forms are required to be filed, then a summary form may be submitted in XML and the forms themselves submitted as PDF.

* Specific examples of the Forms 4562, 4797, 1120, and 1120S Schedule D, where details may be submitted upon request, will be provided.

* The current Form 8633--the application to become an e-file return originator--has been revised to eliminate the requirement that

Forms Permitted to Be Filed in PDF Format

1. Form 926--Return by a US Transferor of Property to a Foreign Corporation

2. Form 970--Application to Use a LIFO Inventory Method

3. Form 982--Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

4. Form 1122--Authorization and Consent of Subsidiary Corporation to be Included in a Consolidated Income Tax Return

5. Form 2439--Notice to Shareholder of Undistributed Long-Term Capital Gains 

6. Form 4466--Application for Quick Refund of Overpayment of Estimated Tax 

7. Form 5712-A--Election and Verification of the Cost Saving or Profit Split Method under Section 936(h)(5)

8. Form 6198--At-Risk Limitations

9. Form 8082--Notice of Inconsistent Treatment or Amended Return 

10. Form 8271--Investor Reporting of Tax Shelter Registration Number

11. Form 8275--Disclosure Statement

12. Form 8275-R Regulation Disclosure Statement

13. Form 8594--Asset Acquisition Statement

14. Form 8716--Election to Have a Tax Year Other Than a Required Tax Year

15. Form 8832--Entity Classification Election

16. Form 8833--Treaty-Based Return Position Disclosure under Section 6114 or 7701(b)

17. Form 8838--Consent to Extend the Time to Assess Tax under Section 367--Gain Recognition Agreement

18. Form 8883--Asset Allocation Statement under Section 338

19. 1120-L subsidiaries

20. 1120-PC subsidiaries

corporate taxpayers must submit fingerprints for the return originator.

Complete guidance--including updated instructions for large corporations that want to e-file their own returns--has been posted on the IRS's website, www.irs.gov.

Unresolved issues include the form and scope of hardship waivers and the treatment of elections and statements. While the IRS had intended to send a letter to those taxpayers subject to the e-file mandate by the end of September, the realignment of tax administration priorities caused by Hurricanes Katrina and Rita delayed the issuance of the letters.

Forms Permitted to Be Filed on Paper

1. Form 5471--Information Return of U.S. Person With Respect to Certain Foreign Corporations

2. Form 5472--Information Return of a 25% Foreign Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business

3. Form 5713--International Boycott Report

4. Form 8858--Information Return of U.S. Person With Respect to Foreign Disregarded Entities

5. Form 8865--Return of U.S. Persons With Respect to Certain Foreign Partnerships

TEI's Forms and Attachments Task Group

R. Don Blaicher

ExxonMobil Corporation

Frederick R. Holt

American Financial Group, Inc.

William J. Marx

General Motors Corporation

Roni Robinson

Halliburton Corporation

Eli J. Dicker 

Tax Executives Institute

Mary Lou Fahey

Tax Executives Institute

Jeffery P. Rasmussen

Tax Executives Institute