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E-file—What's in It For Me?

This article originally appeared in the February 2004 issue of EDINews, the newsletter of the Electronic Data Initiative for Nonprofits (EDIN).

by Midori Morgan-Gaide, Manager, IRS EO Electronic Initiatives Office

In November's EDIN newsletter, we illustrated the differences in processing of electronic and paper returns. In reviewing this chart, it becomes clear that e-filing results in fewer IRS resources devoted to opening and sorting mailing, keypunching data, generating correspondence and filing returns. However, many of you are more interested in the benefits you receive by participating in e-file.

Paper Returns

Electronic Returns

Mailroom: Envelopes are opened payments extracted. Eliminated.
Sort: Returns are manually sorted by form number, e.g. 990, 1040, etc. Eliminated.
Data Entry: Certain data from returns are manually keypunched into a database. Automated: Identical data is automatically merged into same database.
Error Checking: Data is subject to validity and consistency checks. Automated: Many error checks are completed before returns are even accepted for processing.
Posting to Master File: Data from complete returns are uploaded to the Master File. No change in process.
Data from Master File downloaded into another database used to create pool of returns for audit. No change in process.
Storage: Complete and final returns are filed in a warehouse at or near the service center. Automated:100% of electronic data will be stored in a separate database.
Mailroom: Envelopes are opened payments extracted. Eliminated.

First and foremost, if we are not opening and sorting mailed returns, it means you aren't sending us mail! E-filing saves you time and money because you do not have to print (unless you choose to keep a paper copy in your files) and mail the return, which also means you do not have to pay for a proof of mailing, e.g. a certified return receipt. You also save time (which is money!) because many validity and consistency checks included in e-file software help you file a more accurate return. For example, if you inadvertently transpose part of your Employer Identification Number (EIN), our system will electronically notify you of the error before we accept your return for processing. This eliminates the need for later correspondence.

In the future, e-filers will have benefits available to them that paper filers will not have. These include use of the IRS e-services website, single point filing with the states and compliance with disclosure rules.

The e-services website allows an organization or practitioner to view their "account information" on-line. You can check your own filing status, request transcripts and check status of payments or refunds if applicable. Single point filing allows an organization to fulfill both IRS and state filing requirements with a single click. Finally, e-filing generates an electronic data file which you can use to respond to requests for copies of return more quickly and easily.

Bottom line—e-file is more efficient, effective and economical than paper filing for both the IRS and you!
Topics: Law and Regulations