Jan. 1, 2011, tax practitioners currently subject
to New York’s electronic filing
requirements will no longer be able to opt out of electronic
filing, and failure to comply could potentially result
in a $50 fine. The policy change was signed into law
as a provision in one of this year’s New York state
budget bills in August.
The original e-filing mandate, which went into effect
in 2006, required paid preparers in New York to file
client tax returns electronically if the practitioner
prepared more than 100 returns over the course of a year
-- and to continue doing so each subsequent year.
However, practitioners used to be able to opt out of
the requirement on behalf of their clients by filing
TR-800 IT, Taxpayer Opt-Out and Reasonable Cause
Record for Tax Return Preparers, which could be used
if a client did not want to use the system or if the
practitioner had other reasonable cause not to e-file
a return, according to Brad Maione, a spokesperson with
the state Department of Taxation and Finance.
1, 2011, however, the option to use this form will
be eliminated for returns and documents that
are required to be filed electronically, which includes
all general business and New York State S corporation
returns and extensions, as well as all monthly sales
tax returns and Prompt Tax sales returns. If someone
still has reasonable cause not to e-file, then he must
maintain adequate documentation proving it, said the
state tax department’s website. This documentation
will need to be provided to the state if or when the
practitioner receives a penalty bill for failing to e-file.
tax department will consider what constitutes reasonable
cause and adequate documentation on a case-by-case
basis, Maione said, giving examples. One scenario that
the department would deem an acceptable reason for opt-out
would be if a return cannot be e-filed because the tax
preparer’s software doesn’t support all the
required parts of the return, in which case the preparer
would be asked to identify the software to the state
and explain which parts couldn’t be filed for that
return. Another example Maione gave would be if an e-filed
return is rejected multiple times, in which case the
preparer would be asked to submit proof of these rejections.
tax department’s website also elaborates
on what it calls “special circumstances” where
the filer won’t have to electronically file certain
parts of certain forms:
If the filer’s approved e-file software doesn’t
support the e-filing of a required attachment, like a
credit form, that filer would be allowed to file a paper
Chapter member Jonathan M. Horn, who chairs the statewide
of Individuals Committee,
said that he understands why the state wants to make
this change, noting that some unscrupulous preparers
were charging extra for e-filing, which caused most of
their clients to opt out and paper file instead. As a
result, the state tax department has imposed a penalty
for practitioners who charge extra for e-filing, in the
amount of $500 for the first offense and $1,000 for each
subsequent offense, according to the tax department’s
But Horn said
once the opt-out officially ends on Jan. 1, 2011, he
will need to charge his clients an extra
$50 to cover the state penalty if they insist on doing
a paper filing. He said he will also be changing his
engagement letter which currently says “you will
have the option to e-file your return” to “you
must agree to e-file your return.”
Hamlin, a former Utica
Chapter president, said that
she is a big advocate of e-filing, but said
that if people don’t want to e-file -- if they’re
just more comfortable with paper filing -- then they
should not be required to do it.
“I think that if they would prefer not to, then
that should be their right,” said Hamlin, who also
sits on the New
York, Multistate and Local Taxation Committee.
Chapter member Richard L. Feldman noted that, in his personal
experience, people who don’t like
to e-file -- representing a very small minority of his
overall clients -- tend to be older individuals who don’t
trust computers and would prefer to paper file like they
have for years.
“I have one [client] in particular … he wants
to know the return he signs is what goes in the mail
and goes to the state, and the electronic method,
I guess, takes a little control away from the taxpayer,” said
Feldman, also a member of the New York, Multistate,
and Local Taxation Committee.
of reasoning, though, didn’t resonate
with Manhattan/Bronx Chapter member Louis E. Feinstein,
who said that it’s not productive to fight a change
that is inevitably coming. Feinstein, a member of several
NYSSCPA statewide committees, said he thinks there are
better fights that people can pick with the state tax
department than e-filing.
“We’re in the 21st century and it seems
crazy to have people arguing that computers and electronic
filing should not be used. Or arguing that electronic
filing should not be mandated,” he said.
Feinstein said he understands that people feel eliminating
the option to opt out of e-filing is unfair to older
filers who may not want to give out their bank information
over the Internet, but said that anyone banking in this
day and age has already allowed his information to be
put out there.
Dollars and Sense
Horn said that the state could have tried other methods
of addressing the issue of coerced paper filing, which
includes privacy concerns and reluctance to trust new
technology, instead of eliminating the opt-out completely.
But for the state, the bottom line is increasing compliance
with the existing mandates for e-filing, said Maione.
He added that the tax department will be monitoring compliance
and sending out warning letters to practitioners who
do not appear to be following those mandates.