2006 return requirements.

• Author: Dolan, Michael P.

For tax year 2006, the mandate expanded to fliers of Forms 1120 and 1120S that have assets of $10 million or more and file 250 "other" returns. In October 2006, Large and Mid-Size Business Commissioner Deborah Nolan notified those corporations that, based on the assets reflected on their last return, they were required to e-file under the expanded mandate.

Some taxpayers in this second wave of mandated fliers may encounter challenges because of the small size of their tax staffs. In an October 2006 KPMG/Tax Executive Institute survey of tax directors whose corporations filed mandated 2005 returns, 88% said they had incurred either modest or substantial additional compliance costs. Not surprisingly, a majority of the additional expense related to the purchase, training and support costs associated with return-preparation software. For many of those corporations, the costs might have run even higher had their tax departments not had access to in-house technology support for installing and using the software; 86% of the respondents had internal information technology resources to draw on.

The IRS has narrowed the transition options for the second year of the mandate; improvements to both Service systems and commercially available software have reduced the need for some exceptions. For 2006, fewer .pdf forms will be allowed; paper or .pdf alternatives for filing 2005 international forms have been eliminated. A transition option will continue to allow summary data to be entered for certain high-volume transactional forms. Also, in response to privacy concerns expressed by corporate tax directors, the IRS will permit corporate fliers to complete Schedule E, Compensation of Officers, without including officers' names and Social Security numbers; see www.irs.gov/businesses/corporations/article/0,,id=163357,00.html, Section 3.

Another significant change for 2006 returns is that a taxpayer may e-file more than one return. Unlike last year (when only one electronic return per taxpayer was permitted), a taxpayer filing an initial 2006 return and then filing a subsequent (superseding) return before the original or extended due date must now e-file...