Although only some large businesses are required to file government forms and reports electronically, the number of professionals, practices, and businesses filing their taxes electronically this way has increased by 10 percent since 2015.
This change has led to a total of more than seven million electronic reports. Is your chiropractic practice taking advantage of the IRS’s e-file program?
The IRS offers options for paying user fees and federal taxes electronically. All federal tax payments, including federal tax deposits (FTDs), installment agreements, and estimated tax payments can be made using the government’s Electronic Federal Tax Payment System (EFTPS).
The center of the IRS e-file program is the Modernized e-File (MeF). MeF allows you to e-file corporate, exempt organization, individual, partnership, and excise tax returns through the internet. And, if more time is required to master electronic filing, e-filing Form 7004, a request for extension, can be submitted through the MeF platform. However, keep in mind that Form 7004 does not extend the time for payment of tax.
Among the electronic filing options for both chiropractic practices and the self-employed chiropractor are the corporate tax returns, including Forms 1120, 1120S, and 1120F.
Professionals as well as those who authorize others to prepare, sign, and e-file their practice’s returns can electronically file all partner- ship tax forms as well as Form 940, Employer’s Federal Unemployment Tax Act (FUTA) Return, Form 941, Employer’s Quarterly Federal Tax Return, and Form 944, Employer’s Annual Federal Tax Return.
The Electronic Federal Tax Payment System (EFTPS) is a free service offered by the U.S. Treasury Department that allows millions of professional practices, businesses, individuals, organizations, tax professionals, and payroll services to pay all federal taxes electronically. In fact, EFTPS must be used for federal tax deposits, including deposits of employment taxes, corporate income, and corporate estimated taxes and the taxes on the unrelated income of tax-exempt organizations.
Employers are required to deposit all employment taxes electronically through EFTPS, and employers who do not are subject to a 10 percent penalty.
An electronic Social Security
The Social Security Administration currently allows employers to verify the names and Social Security numbers of current and prospective employees before Forms W-2 are submitted. Form W-2 can be filed elec- tronically and wage reports can be checked using a soft- ware program before they are sent.
Up to 50 W-2s can be completed and printed with copies suitable for distribution to employees. Corrections can be accomplished with W-2 online that allows an employer to complete up to 25 forms W-2c and print copies suitable for distribution to employees.
The Department of Labor
The U.S. Department of Labor requires employers to file a number of reports, and many can be filed electron- ically. EFAST2 is an all-electronic system designed by the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation to simplify and expedite the submission, receipt, and processing of the Form 5500 series.
The Form 5500 series is an important compliance, research, and disclosure tool for the Department of Labor, a disclosure document for plan participants and beneficiaries, and a source of information for other federal agencies (including the IRS), Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies. The Form 5500 series is part of the Employee Retirement Income Security Act (ERISA) reporting and disclosure framework, which is intended to ensure that employee benefit plans are operated in accordance with prescribed standards and regulations.
Today, Form 5500 and Form 5500-SF, along with any required attachments, must be completed and filed electronically. This can be accomplished using EFAST2- approved third-party software or IFILE, a free online software application provided by the government that creates and submits Form 5500 and 5500-SF filings.
Not all of these reports involve labor issues. Plan administrators are currently required to file a one-time “top-hat plan notice” with the Department of Labor and provide plan documents in the unlikely event they are requested. (Top-hat plans are unfunded fringe benefit plans, and they cover only a select group of highly compensated employees).
These plans are exempt from the participation, benefit accrual, vesting, and fiduciary rules of ERISA—but perhaps not for much longer. Under a newly proposed regulation, the top-hat plan notice must now be filed electronically.
Required electronic filing
The Financial Crimes Enforcement Network (FinCEN) requires the electronic filing of quite a few of the agency’s reports. E-filing allows chiropractors to electronically and securely file discrete and batched FinCEN financial transaction reports often overlooked by small practices. A registered user can also send secure messages to FinCEN (and receive responses where appropriate).
FinCEN also offers the option of electronic filing of Form 8300, which is for cash payments received over $10,000. While Forms 8300 may continue to be filed on paper, filers have the option of e-filing.
In addition, Currency Transaction Reports (CTRs), Suspicious Activity Reports (SARs), Registration of Money Services Businesses (RMSBs), and Designation of Exempt Persons (DOEPs) must be e-filed. FBARs (Reports of Foreign Bank and Financial Accounts) must be filed electronically, too.
Keeping tabs electronically
Most of the government’s requirements that apply to hardcopy books and records also apply to electronic storage systems that maintain tax books and records. When hardcopy books and records are replaced, you must maintain the electronic storage systems for as long as they are mate- rial to the administration of tax law.
The original hardcopy books and records can be destroyed, but only if the electronic storage system has been tested to insure the records are being reproduced in compliance with IRS requirements. Furthermore, procedures must be established to ensure continued compliance with all applicable rules and regulations.
Changes are here
Electronic filing often exacerbates crime. The IRS estimates it paid $4.1 billion in fraudulent identity theft refunds in the 2016 filing season, while preventing an additional $63 billion attempts at such fraud.
The current filing deadlines are a problem because W-2 wage data from employers is not available until months after the IRS issues most tax refunds. While in the past employers typically had until the end of February if filing on paper, or the end of March if filing electronically.
However, the Protecting Americans from Tax Hikes Act (PATH Act) of 2015 included a new requirement for employers: They are now required to file their copies of Form W-2 to the Social Security Administration by January 31. The new January 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors.
Although the Social Security Administration has found that e-filing would increase if employers filing as few as 5 to 10 W-2s were required to e-file, the 250-return threshold mandating e-filing of Form W-2s by employers remains. Seeking professional advice and guidance might reveal the amazing savings potential of electronic filing and bring your practice into compliance before it becomes mandatory.
Mark E. Battersby E. is a tax and financial adviser, freelance writer, lecturer, and author located in Philadelphia. He can be reached at 610-789-2480.
Disclaimer: The author is not engaged in rendering tax, legal, or accounting advice. Consult your professional adviser about issues related to your practice.