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US Corporate Taxpayers Unprepared For Mandatory E-Filing

by Mike Godfrey, Tax-News.com, Washington

23 December 2005


More than one-third of companies that are required to file their 2005 taxes electronically next year are not ready for e-filing, according to a survey by KPMG LLP.

Under the new Internal Revenue Service requirement, all companies that have assets of $50 million or more and that file at least 250 returns annually must begin filing electronically next year. However, 35 percent of respondents from companies covered by the mandate said they had not yet begun to prepare for e-filing.

While 30 percent of those surveyed are researching their options, and 18 percent have started to evaluate alternatives, only 15 percent have a plan in place to satisfy the e-filing requirement, the survey revealed.

"Although corporate taxpayers may think they have plenty of time to prepare for this change, they should understand that the preparation of this year's return may require several additional weeks of lead time to transition from traditional tax return preparation processes to the single electronic return transmission required," said Michael Dolan, director of IRS policies and dispute resolution in the Washington National Tax practice of KPMG LLP.

KPMG's poll of 205 corporate tax executives found that their most significant e-filing concern involved issues related to the attachment of documentation, noted by 41 percent of respondents. More than one-third (35 percent) also cited concerns at the importing of disparate data into one format.

According to the survey, almost three-quarters (73 percent) of respondents plan to license tax software to process and e-file their returns, while another 14 percent will hire a third-party preparer to handle the returns or develop their own proprietary software. However, 12 percent have not yet decided on how they will comply with the e-filing requirement.

Despite the fact the the 2005 filing season will require more work from corporate taxpayers, Mr Dolan noted that a well-planned e-filing strategy will "reap benefits for a company in the future.”

“But getting to that point will be a time-intensive process. If companies and their software providers and/or tax preparers are on the same page at the onset, the process should be a smooth one," Mr Dolan observed.


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