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Employer electronic filing program.

For nearly forty years, the Internal Revenue Service conducted business in essentially the same way. The structure and process served the federal government and taxpayers well for decades, but they no longer meet the challenges of today's environment. One of the strategies designed to help meet these challenges is Tax Systems Modernization (TSM). The Electronic Filing (ELF) Program is the first IRS program to become operational under the TSM effort. The program has grown rapidly--from 25,000 electronically filed individual returns in 1986 to nearly 12.5 million during the 1993 filing season.

Electronic filing is the wave of the future, and the IRS wants to give as many people as possible the opportunity to participate in this innovative new way of doing business. The IRS's Employer ELF Program allows employers to offer electronic filing as an employee benefit. Following are program highlights,as well as several points that employers may want to consider when determining if they would like to participate in the program.

Advantages for Employees

Taxpayers can benefit from the higher accuracy rate of these returns since there are built-in validity checks in the tax preparation software. Taxpayers also appreciate receiving a quicker refund, the option to use direct deposit, the satisfaction of IRS acknowledgement of the receipt of their return, the ability to file a combined Federal/State return in some states, and if they owe taxes the ability to use a "File Now, Pay by April 15" approach.

Employers can help employees take advantage of these benefits by offering electronic filing as an employee benefit.

Benefits for Employers

There are several benefits the employer can enjoy by offering this program to employees. Primarily, electronic filing has a lower cost than other employee benefits such as daycare and fitness centers. The hardware and software costs of participating in the program are deductible as an ordinary and necessary business expense, and existing computer equipment can be used. In addition, electronic filing is considered a de minimis fringe benefit by the IRS, so its value need not be included on an employee's Form W-2.

Participation in the program can also help to improve a company's image in the community as being innovative through the use of technological advances and environmentally conscious by supporting a reduction in paper usage. Employers can help to boost the morale of employees by helping them to meet their tax obligations efficiently.

Employer Concerns

Even though the foregoing advantages make electronic filing appealing to employers, there are some aspects of the program that could cause people to hesitate in offering this benefit to employees. For example, some employers may believe that it is untimely to offer new benefit programs during an era of organizational downsizing and reorganization. Electronic filing, however, can be offered at relatively little cost compared with other employee benefit programs.

Employers and employees may be concerned with confidentiality issues, possible abuses, and security of employee return information, and employees may be reluctant to share information about income from other sources with their employers. In addition, a signature document (or jurat) Form 8453 which is a paper requirement with electronic filing, must be retained by employers until the end of the calendar year. Finally, employers may be concerned about the space requirements for the system, as well as the time and assistance involved in training employees on the electronic filing system.

Important Information to Consider

What many employers do not realize is that setting up an ELF program is not an expensive undertaking. The cost of a bi-synchronous modem necessary for electronic filing is approximately $1,000. The total cost to an employer, including space allotment, will depend on the number of modems needed and any software and hardware requirements. The system itself takes only a couple of days to set up and test. The data entry training takes approximately one week, and the IRS can assist with this. Additionally, both the software firms and the receiving IRS service centers are able to offer assistance during the post-implementation phase so employers can be assured that help is available if any problems or questions arise.

Employers should take comfort in knowing that there is no employer liability involved with return information so long as the employer or anyone within the organization is not involved with the preparation of the return itself. Many employees are concerned about the diminishing employee benefits and services, the rising costs of health care, pension expenditures, and more expensive medical procedures.(1) Compared with these benefits, electronic filing is one benefit employers can offer at a low expense.

With proper information and assistance, employers will see that electronic filing is not a complicated process; it is the most efficient method for filing tax returns. The IRS has worked with several employers to personalize the electronic filing program to fit the needs of the organization. For example, Tyson Foods Inc. sponsored a VITA (Volunteer Income Tax Assistance) site in which IRS volunteers prepared and electronically filed employee tax returns. The service was provided to the 9,000 employees in eight plants in northwestern Arkansas.(2)

In Florida, a credit union is acting as a return drop off point for credit union members. The returns will then be transmitted by an independent third party. Many employers are using methods such as these to offer this unique benefit to employees.

Other methods that may be pursued to participate in the Employer Electronic Filing Program include setting up the electronic filing equipment for employee use and allowing employees to input and transmit their own return data, or using the personnel department to operate and maintain the program since this office typically would have access to similar types of information. A VITA site could be established to assist those employees with special needs, including persons with disabilities, non-English speaking persons, older taxpayers, or those persons who cannot afford professional assistance with tax return preparation and electronic filing. If available, company credit unions could effectively offered this program to their members.

Employers who participate in the electronic filing program realize that they are helping employees meet an important obligation as efficiently as possible. By participating in the ELP program, employers are able to offer a unique, cost efficient benefit to employees, and be a part of exciting technological advances. Finally, it benefits the IRS and the public by reducing taxpayer burden, improving compliance, and assuring quality.

The IRS is striving to make electronic filing as successful as possible and therefore welcomes any comments and questions. To learn how you can be a part of this exciting program, please write to the Alternative Ways of Filing Program, R:I:A:M, 1111 Constitution Avenue, N.W., Washington, D.C. 20224, or call (202) 283-0290.

(1) "Benefit Expenses Surge," Business Insurance (Nov. 23, 1992).

(2) "Workers' Taxes Filed at Tyson," Arkansas Democrat Gazette (March 15, 1993).

MARQUESA FEDASTION is a Program Analyst in the Marketing Section of Alternative Ways of Filing Office in the Input Processing Division, Office of the Assistant Commissioner (Returns Processing), of the Internal Revenue Service. She received her bachelor's degree in business administration and communication arts from California Lutheran University.

FRANK MONTERO is a Co-Op Student in the Marketing Section of Alternative Ways of Filing Office in the Input Processing Division, Office of the Assistant Commissioner (Returns Processing), of the Internal Revenue Service. He received his bachelor's degree in marketing from New Mexico State University where he is currently pursuing his Masters of Business Administration degree.
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Title Annotation:tax filing
Author:Montero, Frank
Publication:Tax Executive
Date:Sep 1, 1993
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