Rejected! N.Y. State Tax Department Rights an e-Filing Wrong

Tax practitioners trying to comply with the state's new e-file/e-pay mandate were filing in vain for almost a week because of a glitch with the state tax department's e-file system.

Tax practitioners have until Jan. 30 to file the IT-204-LL, Limited Liability Company/Limited Liability Partnership Filing Fee Payment Form. The return is used to collect filing fees for limited liability companies (LLCs) and partnerships (LLPs). Fees range from $25 to $4,500, depending on an LLC or LLP's New York source gross income, according to the state.

This is the first year that the state is requiring by law that these types of returns are not only filed online, but paid online as well. But, the system stopped working. Anyone who attempted to e-file and e-pay their clients' IT-204-LL return between Friday night and early Thursday afternoon were sent rejection notices from the IRS, said Chris Chiesa, who works in the office processing and taxpayer services division at the state tax department.

What does the IRS have to do with a state tax return?

E-filed state partnership or corporation tax returns are sent through the IRS. Chiesa said the IRS doesn't open the file, but the agency acts as a conduit between the sender (the filer) and the receiver (the tax department).

Because the IRS wasn't recognizing the state's electronic transmitter identification number -- it's ETIN -- electronic filers were receiving a message that said New York is not a participating state in the modernized e-file program.

The problem has been fixed, but Chiesa said anyone who received a rejection notice, should make a "good faith effort" to e-file the payment again.

He added that if a tax preparer did not receive a rejection notice, but simply a "sent to state" response, the tax department did receive the return and an acknowledgment from the state will be sent shortly. He warned tax preparers not to send a paper return if they already e-filed the IT-204-LL.

"If they send it electronically and then send it on paper, their accounts are going to get debited and [the department] will also take the check, so they'll have their money taken twice," Chiesa said. "We're telling everyone to be patient."

Anyone looking to the tax department's Web site for information found this notice on the Department of Taxation and Finance homepage:

E-filing for IT-204-LL - technical problems are resolved

The IRS has resolved a problem that incorrectly caused e-filed IT-204-LL returns to be rejected. If you tried to e-file the IT-204-LL return and your return was rejected, please try again.

Please do not file a paper return. It may take the Department some time to catch up on acknowledgments so you may not receive them until after the due date. We understand the inconvenience this caused you, and we thank you for your patience.