Electronic filing - it's in everyone's future.

• Author: Seitzinger, Bonnie L.

The IRS electronic filing program has expanded rapidly since its initial offering. In 1986, 25,000 individual returns were filed; during this year's filing season, the Service processed 12.5 million electronically filed returns, representing over 11% of 1992 returns. The IRS is continually improving on the program and in doing so hopes to see the number of electronically filed returns jump to over 22 million for 1995 returns.

The Service has stated that in the future there will be only three acceptable methods of filing: (1) electronic, (2) 1040 PC-condensed print format and (3) manual input on IRS scannable forms. The 1040PC format return consists of a computer-generated condensed three-column return. This paper return contains only the IRS form lines for which there are amounts. 1040 preparation software may have this print method available. The Service plans to scan the 1040PC and the manually prepared returns in the future. It is not clear if and when these three filing methods will become mandatory; however, the IRS has indicated its desire to make electronic filing the standard filing format by the end of the century. Now is the time to prepare for a future in which electronic filing will be vital to a tax practice.

What's in it for practitioners

and their clients;

Offering electronic filing services for clients' individual tax returns may be the right choice in the very near future. As the popularity of electronic filing continues to grow and taxpayers demand this service, those practitioners who respond accordingly will place themselves in a leading competitive position. Electronic filing is the next step toward increasing filing season revenues through expanded services and increasing a client base. The fees charged,by practitioners vary greatly depending on their marketing philosophy. Some do not charge an additional fee if they have prepared the return. They view electronic filing as a giveaway to retaining existing customers or attracting new ones. Alternatively, they may offer free electronic filing to clients who submit their data before a certain date to help ease the practitioner's peak work load. For others,the added service of providing refund anticipation loans (RALs) may generate additional revenues.

The big plus for clients is faster refunds. Refunds can be expected in two to three weeks (as compared to the six to eight weeks for paper returns). And the two to three weeks can be accelerated by requesting direct deposit into the taxpayer's bank account. Of course, taxpayers can accelerate their refunds even more by using an RAL.

Because of the checks in the electronic filing software and the error checking done...