A Different Kind of E-Tax

by Amy Blankstein

They want you to — ante up on line. As part of its ongoing efficiency crusade, the Internal Revenue Service wants to make it easier for American businesses to pay taxes. Personal 1040 form filers have benefited from the IRS streamlining for some time now: Not only are their forms short and sweet, they’ve been able to file their returns through Web-based service providers since 1998. Now the IRS is expanding electronic filing and payment programs for business taxes to include access to the time-saving capabilities of the Web.

In April, 64 businesses filed their first quarter 941 forms using a Web-based service, NationTax Online (www.nation tax.com). And in July, the agency expanded their Electronic Federal Tax Payment System program (EFTPS), which previously had allowed businesses to deposit payments via phone or modem, to enable them to file over the Internet.

Businesses have been able to e-file various returns via third party services like ADP and PayMaxx since 1994, but in the Reform and Restructuring Act of 1998, Congress set several edicts for the agency to make the tax-returns process more user friendly and cost efficient: By the year 2003, all returns that are prepared electronically will be filed electronically, and by the year 2007, 80 percent of all tax returns will be handled electronically. According to Sherrill Fields, national director, diversified electronic filing at the IRS (www.irs.gov), the agency has set the bar higher. “We’ve set the goal for ourselves that we want 80 percent of all transactions to be done electronically, and that could mean filing, paying, account inquiry, tax law inquiry ­ those are all transactions that we’d like to conduct electronically” she says.

By filing via the Web, businesses get immediate acknowledgment and feedback from the IRS on whether their payments or returns were received or filled out correctly. Web filing deadlines are several weeks later as well. And businesses who file on line don’t have to invest in software or communications hardware that are otherwise necessary for electronic filing. “We brought the online program on board, thinking that it’s perfect for the small business person who doesn’t have their own IT staff to manage complex communications protocols.” Fields says.

But don’t get too excited. While online filing can help the IRS process the 23 to 24 million 941 forms it receives annually, those are just the tip of the iceberg ­ most companies must file many more, including employment, partnership, fiduciary, exite, and corporate income tax forms. “We’re pretty much in the infancy stages of getting a business e-file program going,” Fields admits. “We’ve got a long way to go. There are numerous business tax returns that, at this point, the only way to file is by paper.” Of course signing up with the Web service provider involves an intricate three-partner process, and requires just one more form.

Small Business Computing Staff
Small Business Computing Staff
Small Business Computing addresses the technology needs of small businesses, which are defined as businesses with fewer than 500 employees and/or less than $7 million in annual sales.

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