2020 Legislative Changes to Efiling

On July 1, 2019, President Trump signed into law the Taxpayer First Act of 2019 (TFA), designed to improve the IRS’ interactions with us taxpayers by enacting changes to the IRS’s organizational structure, customer service, enforcement procedures, management of information technology, and use of electronic systems.


How does it work?

First, this is how filing by paper works. When you mail your completed tax return to the IRS, machines do the initial sorting, envelope opening, and even the setting aside of returns that include payments by check. Returns then move on to employees, who sort the returns based upon their type: individual, corporate, etc. The returns are then batched into groups and sent to data transcribers, who manually enter the information into the IRS computer system. Once the data is in the system, a program checks the return for errors, such as math errors. If none are found, the return is processed, and the IRS issues you either a refund or a balance due notice. If a mistake or two is found, the IRS may fix it for you and send you correspondence explaining it all.

Next, e-filing works by eliminating the data transcribers and allowing for cross referencing with other e-filed information from employers, banks, mortgage companies and the like. In between your tax program/preparer and the IRS computer system is the Electronic Return Originator (ERO), an authorized IRS e-file Provider who originates the electronic submission of the return to the IRS. An ERO can be the software developer or the tax preparer themselves.

Why does the IRS like e-filing so much? It saves time and money, for example less data transcribers and less occupancy costs such as office space and toilet paper. In theory, the benefit of increased digital information that also allows for cross referencing improves compliance and brings in more enforcement revenue. Still relevant and ICYMI, Voluntary Compliance My (fill in the blank)!

The IRS also likes when businesses e-file information returns. They like it because it gives them a heads up knowing how much income people should be reporting, in other words, a method of combating underreporting.

Why do taxpayers like e-filing so much?

Data transcribers make mistakes too. Mistakes, that if you catch them will be a giant pain in the …. to resolve.

No paper, no ink. No postage, no trip to the post office. And within about 24 hours you get proof of receipt and start of processing by the IRS via a confirmation! Or proof of rejection.

And what some like best: faster refunds, much faster refunds especially if you instruct to direct deposit.

And what others like best: it can be free. The IRS’ Free File offers options for taxpayers with adjusted gross incomes (AGI) of $69,000 or less and taxpayers with AGI over $69,000. Can I e-file for free? Keep in mind, while the IRS may have many software partners, it doesn’t recommend or endorse any of them.

Be sure to look for this standard language: “IRS Free File Program delivered by company name/product name.” If you are not eligible for any of your choices be sure to follow the link that is supposed to take you back to the IRS Free File page.

WHAT’S NEW Courtesy of the Taxpayer First Act (TFA) of 2019.

Tax-Exempt Organizations Now Have to E-file.

Tax exempt organizations now have to e-file all returns within the 990 series, Return of Organization Exempt from Income Tax, and Form 8872, Political Organization Report of Contributions and Expenditures. Prior to this, only those tax-exempt organizations with assets of $10 million or more filing at least 250 returns during a calendar year had to e-file. This is effective for tax years starting after July 1, 2019. There is the usual grace period (IRS term – transitional relief) for the not the kings of the jungle. In this instance, the requirement is extended out two years. Organizations with annual gross receipts of less than $200,000 and less than $500,00 in gross assets are required to e-file tax years starting August 1, 2021 and after.

Congress is also requiring the IRS to provide the public with these returns in a machine readable and text searchable format.

More Businesses Will Have to E-file.

Taxpayers filing a certain number of information returns must file electronically. Think 1099s. The TFA reduces this threshold from 250 in 2020 to 100 in 2021, and to 10 in 2022. For partnerships, the threshold is 150 in 2019, 100 in 2020, and 50 in 2021. This does not affect the existing requirement for partnerships with more than 100 partners to file an electronic income tax return.


In addition to the above reasons to embrace e-filing: better protection of your confidential information and easier access to it should you ever need it in the future.

Last year, the IRS had received 155.8 million tax returns for the 2018 tax year of which 138.2 million were e-filed. Of e-filed returns, tax professionals prepared 80.6 million of them and 57.6 million were self-prepared.

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McAtee and Associates’ Disclaimer:

Our blog is intended for educational and awareness purposes.  The general information provided about taxes, accounting, and business-related topics is by no means intended to provide or constitute professional advice.  Reading our blog does not create a Client/CPA relationship between you and us.  The blog, including all contents posted by the author(s) as well as comments posted by visitors, should not be used as a substitute for professional advice or as a substitute for communicating with a competent, human professional.

Our blog posts are written using current information and current or proposed rules and regulations.  Information becomes old and outdated. Rules and regulations are frequently changed, added, amended, and/or left to expire.  This is extremely true with most things tax and to a lesser and slower extent, most things accounting.  We usually do not go back and update posted blogs.  Always check with your CPA or accountant regarding not only rules and regulations but available options and how it all applies to your fact pattern and you.


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