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21 August 2018

IRS is Sending Mixed Messages to E-filers

IRS is Sending Mixed Messages to E-filers

The IRS prefers you file your taxes electronically, but the penalties for late filing and errors are harsher than for taxpayers who file on paper! So should you e-file? That’s the question many taxpayers and CPAs are asking, and the answers aren’t quite clear yet.

The problem first came to light earlier this year with the case of Spottiswood v. the United States. The taxpayer submitted his taxes through TurboTax but didn’t realize the filing had been rejected until he logged in again 18 months later (he had overlooked an email about the issue from TurboTax). The problem was with a mistyped Social Security number, which deemed the entire tax filing and payment unacceptable—leaving the taxpayer not only with overdue payment penalties but with the steepest penalty of all: failure to file. The argument, however, is that the IRS likely would have acknowledged and processed a paper return with the same mistake.

As Forbes contributor Peter J. Reilly explains, “If you are filing a paper return, there might be some deficiencies. If it was a paper submitted in school, you might have gotten a C+, but it is still a return. Filing electronically, though, even an A- is treated as an incomplete. It's not that you are missing out on the honor roll; you are going to the headmaster's office to be thrashed.”

A similar case will be heard in the Fifth Circuit of Appeals. In that case, the taxpayer used a paid preparer to eFile his 2010 joint return, which was returned without his knowledge. “The crux of that decision is that you cannot delegate responsibility for meeting the due date of a return,” says Reilly. The case was named one of the “Federal Tax Cases to Watch in the Second Half of 2018” by Law360. We’ll watch it, too, and will let you know what happens.

In the meantime, be sure your eFiled taxes are properly filed—even if they were filed by a tax preparer. One of the easiest ways to do so: If the money you owe doesn’t get deducted from your account within a month, investigate it. And feel free to contact us with questions.

Image Copyright: ayo88 / 123RF Stock Photo

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