Regulations 810-3-27-.09 and 810-3-27.10 were approved by the Alabama Department of Revenue’s Research Division and became effective July 9th, 2004. These new regulations contain a provision making E-File mandatory for returns prepared by certain tax practitioners. The mandate requirements for tax preparers will be “phased” in over a 3 year period starting January 1, 2004. The economic necessity of this new individual income tax E-File mandate will reduce tax return processing costs for the state. The following list of questions and answers may be helpful to you regarding the mandatory E-File regulations.

 

1. Where can I read more about Administrative Regulations 810-3-27-.09 and 810-3-27.10?

You can view the new regulations at: http://www.revenue.alabama.gov/incometax/elfmandregs.html.

 

2. Why is E-File being made mandatory for tax preparers?

By making E-File mandatory, we can significantly reduce the cost of processing tax returns. (During the second year of implementation, we anticipate in excess of 300,000 additional E-File returns.)

 

3. Who must E-File tax returns under these regulations?

Tax preparers who prepared 250 or more Alabama individual income tax returns for the taxable year that began on January 1, 2004 ; prepare 100 or more returns using tax preparation software for the taxable year that begins on January 1, 2005; and those who prepare more than 50 returns for the taxable year that begins on January 1, 2006, will be required to E-File all of their current year individual returns.

 

4. What types of returns must be E-Filed under the mandatory Regulations?

All current year individual income tax returns are required to be E-Filed.

5. If I reside or have an office outside Alabama, am I still subject to the mandate?

Yes. If you meet the mandatory E-File requirements, all Alabama returns you prepare are required to be E-Filed, even if you reside or have your office(s) outside the state.

 

6. When will mandatory E-File take effect?

Mandatory E-File will take effect on January 1, 2004.

 

7. What if I have multiple offices that each file less than 250 returns?

For the purpose of these regulations, an “Income Tax Preparer” is defined as a person who prepares, in exchange for compensation, or who employs another person to prepare, in exchange for compensation, any return for the tax imposed. This means, even if a person in your employ or one of your offices files less than 250 returns, if the total of all tax returns prepared from multiple offices equals more than 250 and tax preparation software is used for one or more returns, all acceptable returns prepared are required to be E-Filed.

 

8. How do you plan to enforce mandatory E-File?

An income tax preparer may be subject to a random audit for each acceptable original individual income tax return prepared by that income tax preparer that is not electronically filed, unless it is shown that failure to electronically file that acceptable original individual income tax return is due to reasonable cause and not due to willful neglect.

 

9. What if my client (the taxpayer) does not want their return E-Filed?

A taxpayer can make the election not to electronically file an acceptable original individual income tax return (opt-out) by filing a signed paper original individual income tax return. The original signed paper return will suffice for the “opt-out” qualifications. If your client prefers to file a paper return and has made the election to “opt-out”, that clients paper return will be included in the total mandate count as defined in 810-3-27-.09.

 

10. How will I prove that returns that were not E-Filed were due to reasonable cause and not willful neglect?

Reasonable cause includes, but is not limited to:

a. A taxpayer’s election not to electronically file an acceptable original individual income tax return by filing a signed paper original individual income tax return (opt-out) will show proof the returns were filed due to reasonable cause.

b. Any electronically prepared original individual income tax return that cannot be filed or transmitted electronically by the tax preparer, or any original individual income tax return that cannot be accepted by the Department.

Willful neglect includes, but is not limited to:

a. Intentional failure to comply with the AL E-File mandate regulations.

b. Lack of knowledge that the mandate exits and/or lack of understanding the regulations.

 

11. Does the ADOR (Alabama Department of Revenue) provide material I can give my clients to explain the new regulations?

Yes. You can access and print a copy of the regulations for the taxpayer at http://www.revenue.alabama.gov/incometax/elfmandregs.html as needed. You may wish to also download these “Frequently Asked Questions and Answers” for your clients.

 

12. What are the requirements for signing up for the Alabama E-File Program?

Alabama has only two requirements to be accepted as an ERO (Electronic Return Originator) into the AL E– File Program:

a. You must be accepted with the IRS via the 8633. Once you are approved then you are automatically accepted into the AL E-File Program. We do not need a copy of the Federal 8633 (Application to Participate in the IRS e-file Program).

b. You must use software that has been tested and approved by the State of Alabama. Contact Tavares Mathews, Alabama Individual Income Tax E-File Coordinator to check the status of your current software. Please call (334) 353-9497.

 

13. I hear the IRS is behind in processing E-File applications. What do I do if I cannot get into the Alabama E-File Program on time?

If you do not receive your IRS Electronic Filer Identification Number (EFIN) in time to start e-filing returns, we recommend you file returns on paper until you become accepted in the IRS and AL E-File Program. As soon as you receive your IRS EFIN and your software has been approved by Alabama, you can begin e-filing all applicable returns.

 

14. What if I am denied participation in the IRS E-File Program?

We require you to be enrolled in the IRS E-File Program.

 

15. I am already approved to file Alabama returns. Do I need to re-enroll in the program for mandatory E-File?

No. If you are already accepted in the Alabama E-File Program, you do not need to apply for acceptance for the purposes of mandatory E-File.

 

16. Will there be a waiver process allowing me to be exempt from participation in mandatory E-File?

No. Alabama has no provisions in the regulations that allow for a preparer waiver.

 

17. I’m new to E-File. Where do I learn more about your E-File Program?

You can find information on our website at: http://www.revenue.alabama.gov/incometax/efilemain.htm or by calling our ERO Help Desk at (334) 353-9497.

 

18. Where can I get software to E-File?

We provide a listing of approved E-File software developers on our website: http://www.revenue.alabama.gov/incometax/efilemain.htm.

You can also contact our ERO Help Desk at (334) 353-9497.

 

19. What are you going to do with all the money you’ll save from us e-filing?

The savings generated by mandatory E-File will help reduce the state’s overall budget deficit.