IRS to grant only limited e-filing waivers: non-support from software vendors won't qualify.

In recent weeks, the Internal Revenue Service has begun posting to its website (www.irs.gov) information on the general areas in which waivers from the mandatory e-filing requirements will be granted. Based on the postings to date, waivers will be granted in only very narrow circumstances and, perhaps more important, the failure of a taxpayer's software to support e-filing will not qualify as grounds for a waiver. Specifically, the IRS states:

The Service will generally not approve a request to waive the electronic filing requirement if the software purchased or licensed by a taxpayer or a return preparer does not include all of the features necessary to comply with the Modernized e-File requirements set forth in IRS regulations, revenue procedures, publications, and other instructions posted to the irs.gov website.

To date, the IRS has identified only three areas in which general waivers will be granted:

* Substituted Return Process. If a taxpayer has a business need to file a subsequent corporate income tax return for the same tax period prior to the extended due date of the return, the taxpayer should request a waiver. If the waiver is approved, the taxpayer will file the first return on paper and then the substituted (subsequent) return electronically.

* Bankruptcy--Chapter 7. The taxpayer, otherwise required to e-file, has filed a petition with the bankruptcy court under Chapter 7 of the Bankruptcy Act.

* Final or Last Required Return. The taxpayer, otherwise required to e-file, will be filing their Final return, or last return they are required to file, during 2006.

To date, few waiver requests have been granted.

According to TEI President Michael P. Boyle, the Institute remains committed to working with the IRS to address administrative issues, but remains concerned that the resources of taxpayers and software vendors to meet the requirements may be overtaxed. "Taxpayers cannot change vendors at the flick of a switch," he stated. "Substantial lead time is needed to install and test the software...