Dealing with the IRS? Electronic is best

| 10/20/2022
Dealing with the IRS? Electronic is best

The commissioner of the IRS has committed to eliminating its historic backlog of returns and other communication by the end of 2022, before the start of the next filing season. The backlog was caused by shutdowns during the pandemic and other changes related to COVID-19. The IRS recently received $80 billion in new, more flexible funding intended to allow it to hire more employees and modernize its technology. However, it will be a while before the effects of this new funding are fully realized. In the meantime, one thing taxpayers can do to help the IRS reduce its backlog is to avoid adding to it by using electronic means to file returns, make payments, and communicate with the IRS when possible. Interacting with the IRS electronically will be timelier and more accurate for taxpayers.

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The electronic route

IRS electronic filing

Many taxpayers and preparers are required to electronically file returns, and proposed regulations would require electronic filing in more situations. Some returns cannot be electronically filed, and individuals and estates are not required to electronically file their tax returns. Even if not required, there are many opportunities for taxpayers and preparers to electronically file returns.

IRS electronic payment

Most businesses are required to make many of their payments to the IRS electronically using the Electronic Federal Tax Payment System (EFTPS). However, even when not required to use the EFTPS, many taxpayers still can sign up to use the system. Other options are available to pay electronically for payments not required to be made using the EFTPS. Taxpayers should consider making payments electronically whenever possible to reduce the risk of delays in payment processing and potential misapplication of payments.

Online accounts

Individuals can set up and use an online account to manage many of their interactions with the IRS electronically, including viewing tax balances, accessing tax records, making payments, entering payment plans, or authorizing a professional tax adviser to communicate with the IRS on their behalf. Note, however, that some people cannot set up an online account because of system limitations.

E-Services

E-Services are used mostly by practitioners and other service providers. However, businesses can use e-Services to access the IRS Taxpayer Identification Number (TIN) Matching system, which validates name and TIN combinations to help avoid information reporting notices and penalties, and to file Affordable Care Act-related information returns.

Benefits of IRS electronic filing, payment, and communication

The benefits of interacting electronically with the IRS vary by situation and taxpayer, but many can experience the following advantages of filing, paying, and communicating with the IRS electronically when possible:

  • Reduced risk of errors on returns. Paper returns can be filed with errors, some of which might require human intervention at the IRS to resolve, leading to further delays in processing. Filing electronically can help taxpayers avoid receiving notices from the IRS because of errors or omissions and can reduce the potential for additional tax that taxpayers were not planning for.
  • Decreased likelihood of data input or processing errors. Filing and paying electronically avoids the need for IRS personnel to input data from paper into IRS systems, therefore reducing the risk of errors in return processing or payment application.
  • Faster and more efficient processing. Faster processing avoids premature IRS notices, including those imposing tax and penalties, and could result in taxpayers more quickly receiving refunds. Nothing is more frustrating than spending time and money to correspond with the IRS to resolve a matter when the document, information, or payment that the IRS believes is missing or late was sent timely.
  • Increased availability. As taxpayers file electronic returns, IRS personnel are able to focus on reducing the current paper backlog and answering more phone calls.

The paper route

Taxpayers that must send information or payments to the IRS through the mail should use certified or registered mail with the U.S. Postal Service or another IRS-approved private delivery service. Taxpayers should retain receipts and a copy of what was sent so they have proof of what was mailed and when, in case the package is lost.

Related topics

The application period is open for the Compliance Assurance Process (CAP) program for the 2023 tax year. Taxpayers applying must do so before Nov. 15.
Taxpayers looking to make one-time tax credit claims for alternative fuel sales and use should pay attention to the IRS' recently released guidance.
The application period is open for the Compliance Assurance Process (CAP) program for the 2023 tax year. Taxpayers applying must do so before Nov. 15.
Taxpayers looking to make one-time tax credit claims for alternative fuel sales and use should pay attention to the IRS' recently released guidance.

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Rochelle Hodes
Rochelle Hodes
Principal, Washington National Tax
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Adam Silva
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Lauren Owens